The Government of Canada has introduced an underused housing tax on the ownership of vacant or underused housing in Canada. The Canada Underused Housing Tax Act (UHTA), which governs the underused housing tax, received royal assent on June 9, 2022. The first filing for 2022 is due on April 30, 2023. The UHT is a 1% annual levy on the value of a ‘vacant or underused’ property.
The Canada Underused Housing Tax is typically applicable to non-resident, non-Canadian owners of vacant or underused housing in Canada. The majority of Canadian owners of residential property, known as excluded owners, are not subject to obligations and liabilities under the Underused Housing Tax Act (UHTA). However, certain Canadian owners may be liable for the underused housing tax in specific situations.
Excluded owners
Unless residential property owners are excluded owners, they are required to complete an annual return.
Excluded owners include, but are not limited to:
- Most Canadian citizens or permanent residents (except for affected owners)
- Any person that owns a residential property as a trustee of a mutual fund trust, a real estate investment trust, or specified investment flow-through trust for Canadian income tax purposes
- A registered charity
- A cooperative housing corporation, hospital authority, municipality, public college, school authority
- An Indigenous governing body or corporation owned by an Indigenous governing body
- The government of Canada or a province, or an agent of the government of Canada or a province
Affected owner
If you are an owner of a residential property in Canada on December 31 of a calendar year and you are not an excluded owner of the residential property on that date, the CRA refers to you as an affected owner of the residential property for the calendar year.
All affected owners of residential property have to file an annual return.
Although the vast majority of Canadian owners of residential property are excluded owners, there are situations where some Canadian owners of residential property are affected owners and, therefore, have to file an annual return. Here are a few examples of affected owners:
- Non-Canadian citizens or permanent residents
- Canadians who own a residential property as a trustee of a trust
- Any person that owns a residential property as a partner of a partnership
- A corporation incorporated outside Canada
- A corporation whose shares are not listed on a Canadian stock exchange
- A Canadian corporation without share capital
As an affected owner, you must file an annual return.
If you are an affected owner of more than one residential property in Canada, you must file a separate return for each property.
If you are one of several affected owners of the residential property, each of you must file a separate return for the property.
Determine if you are an affected or excluded residential property owner
A failure to file an UHT return can result in penalties beginning at $5,000 for individuals and $10,000 for corporations.