Canadian underused housing tax Implications for non-Canadian owners
Oscar Torres
by Oscar Torres
First announced in the 2021 Canadian Federal Budget, the Federal Underused Housing Tax (UHT) came into effect in 2022, and UHT returns must be filed with any UHT owed and paid for the first time in 2023. The UHT imposes a tax of 1% of the value on any residential property declared as vacant and owned by any non-resident non-Canadian. The tax is calculated as 1% of the greater of the property’s assessed value for the year for property tax purposes and the most recent sale price. Additionally, the UHT requires non-resident, non-Canadian individuals, corporations, trusts and partnerships that own residential real estate to file a return, even if paying the tax is not required.
There are two separate and distinct components to understand your requirements regarding the UHT filing: (i) whether a UHT return filing is required, and (ii) if there is an obligation to pay the UHT.
Non-resident, non-Canadian owners of residential real estate in Canada must file a UHT return even if there is no UHT obligation.
This refers to individuals who are not citizens or permanent residents of Canada. Therefore, an individual can be a resident for income tax purposes, and still be subject to UHT if they are not a citizen or permanent resident of Canada.
Private corporations, trusts and partnerships that own residential real estate must file a UHT return even if there is no UHT obligation.
The 1% UHT is determined to be owed or not based on the four exemption categories below. Generally, if the property is not used by you or your spouse/common-law partner, is not rented, or is only rented short-term, UHT will likely apply. For a comprehensive list of exemptions, visit this Government of Canada website.
Owner – aims to exempt Canadians and Canadian corporations with greater than 90% Canadian ownership.
Availability – aims to exempt property that is under construction or renovation, or is seasonally inaccessible for several months.
Occupant – aims to provide exemptions for properties with occupants with written contracts.
This category makes specific exemptions for international students who use the property as a primary residence while attending a designated learning institution.
Location – aims to exempt vacation properties located in an eligible rural area of Canada, and occupied by the owner or spouse or common-law partner for at least 28 days in the year.
If you are still unclear if the UHT applies to you and your residential properties, this reference chart may help you determine if you need to file and pay the UHT and how to calculate the tax.
The UHT return filing deadline is 30 April of the following taxation year, resulting in 30 April 2023 being the first UHT return filing deadline for the 2022 taxation year. Although the UHT return and payment deadline is 30 April 2023, the Canada Revenue Agency (CRA) will not impose penalties or interest for UHT returns or payments received prior to 01 November 2023. Penalties for failure to file a UHT return are severe, including a minimum of CAD 10,000 for corporations and a minimum of CAD 5,000 for individuals. While the UHT return filing deadline happens to coincide with Canada’s personal income tax return filing deadline, it is an entirely separate tax return and must be filed separately. If you have questions about the UHT or any other personal and/or corporate tax return filing obligation, reach out to a tax expert at Bateman MacKay.
XLNC member firm Bateman MacKayBurlington, ON, CanadaT: +1 905 632 6400Audit, Accounting, Tax, Corporate Finance, Strategy, Management Consulting, Fiduciary
Bateman MacKay is one of the only full-service accounting firms for owner-managers in the west GTA with offices in Mississauga and Burlington. The CPA firm's focus on high quality work, relationship building and the use of secure and forward thinking technologies are just some of the reasons they are able to proactively advise and position clients for success.
A chartered professional accountant and a licensed public accountant, Oscar Torres earned his Bachelors of Commerce (Accounting and Finance) from Ryerson University. He is leading Bateman MacKay’s assurance and advisory team, offering his clients a wide range of services including accounting, assurance, taxation, and business advisory services. Contact Oscar.
