The underused housing tax (UHT) is a Federal tax applied to vacant or underused housing in Canada, effective January 1, 2022. Generally speaking, this tax targets foreign property owners, but certain Canadian owners may be impacted, see the examples below.
There are significant penalties for affected owners who fail to file an annual return when it is due, with a minimum penalty of $5,000 for individuals who are affected owners, and $10,000 for owners other than individuals.
On March 27, 2023, the CRA announced it would provide transitional penalty and interest relief and more time for owners to comply with the UHT filing requirements. The UHT filing deadline is May 1, 2023, for affected owners who own residential properties on December 31, 2022. However, as shared in a CRA news release on October 31, 2023, the application of penalties and interest for the 2022 calendar year will be waived for any late-filed UHT return and for any late-paid UHT payable, provided the return is filed and the UHT is paid by April 30, 2024.
This means that although the deadline for filing the UHT return and paying UHT tax is still May 1, 2023, no penalties or interest will be applied to the UHT returns or on payments that the CRA receives before May 1, 2024.
Learn more about the initial UHT transitional relief and the recent extension of the relief in CRA’s press releases.
A Form UHT-2900 (Underused Housing Tax Return and Election Form) needs to be filed for each of your properties when all of the following conditions are met on December 31 of a calendar year:
Note: Affected owners required to file a return may not have to pay the UHT if they are exempt. Details surrounding the exemptions can be found here.
Below is a summary of certain information that must be included on the UHT-2900 form if you are an affected owner.
Residential property is defined as property that is either of the following:
Definitions:
Affected owners of a residential property may be exempt from the UHT if the property is any of the following:
You would be considered an owner for the purposes of the UHT if any of the following apply:
You are not considered an owner of a residential property if you give continuous possession of the land on which the property is situated to either of the following:
A long-term lease is a lease of land that meets either of the following conditions:
OR
If you are an owner of a residential property in Canada on December 31 of a calendar year and you do not meet the criteria of an excluded owner of the residential property on that date, you are required to file an annual return.
If you are an individual and meet any of the following criteria, you may be classified as an affected owner and required to file an UHT return:
If a non-individual owner meets any of the following criteria, it may be classified as an affected owner and required to file an annual return:
*Any capacity means that a person is an owner of residential property in Canada in any of the following capacities: their own right; as a trustee of a trust (including as a personal representative of a deceased individual, but excluding as a trustee of a trust that is a mutual fund trust, real estate investment trust or SIFT trust for Canadian income tax purposes); or as a partner of a partnership.
Excluded owners do not have to file a UHT return or pay the UHT.
The UHT is determined using the following formula
[1% of property value] X [person’s ownership %]
The value of a residential property can be determined using one of two methods:
1. Taxable Value
The greater of:
a. The assessed tax value for the year under the related property tax assessment
b. The most recent sale price on or before December 31 of the calendar year
2. Fair Market Value
Fair market value can only be used if the owner files an election to use this method for the property (the election is included on Form UHT-2900). The owner must obtain an appraisal of the property by an accredited, arm’s length real estate appraiser.
The CRA continues to provide updates and technical information on the UHT. Stay up-to-date and access CRA support here.
The CRA released the UHT Frequently Asked Questions resource, (Underused House Tax Notice UHTN15). Here you can find answers to commonly-asked questions about the UHT that may assist you in determining whether you need to file a UHT return, or if you fall into one of the exemptions from the 1% tax. The CRA indicates the page will continue to be updated with additional questions as they come in and need to be clarified.
This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice.
If you are looking for Tax Services, Crowe MacKay provides personalized support. Our tax professionals will help you maximize tax-planning opportunities and ensure the minimum amount required by law is paid.
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