New Underused Housing Tax (UHT)
Effective January 1, 2022, this annual 1% tax on the ownership of vacant or underused residential property in Canada usually applies to non-resident and non-Canadian owners. However, it also applies to Canadian owners in certain situations.
Below are some of the key points about the Underused Housing Tax:
For an owner of a residential Property in Canada, who is NOT required to file the form UHT-2900 ?
- An individual who is a Canadian citizen or permanent resident,
- Any person who owns a residential property as a trustee of a mutual fund trust, REIT, or SIFT trust for Canadian income tax purposes,
- A Canadian corporation whose shares are listed on a Canadian stock exchange,
- A registered charity,
- A cooperative housing corporation, or
- An Indigenous governing body or a corporation wholly owned by an Indigenous governing body.
In other words, any person/corporation/trustee who owns a residential property in Canada other than those listed above must file the return UHT-2900, whether or not need to pay the 1% UHT tax.
Penalties for failing to file the return on time:
- Minimum penalty of $5,000 for individuals; or
- Minimum penalty of $10,000 for corporations.
Filing deadline:
- The return must be filed by April 30 of the following calendar year.
- Announced on March 27, 2022 that CRA will provide a transitional relief to waive the penalties or interest for UHT returns and payments till October 31, 2023.
What exemptions are available? i.e., no need to pay for this 1% tax. (Please note that exemption from the UHT does not mean to not file the UHT tax return.)
There are few exemptions available, namely:
1. Exempt by the type of owner:
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- A specified Canadian corporation
- A partner of a specified Canadian partnership, or a trustee of a specified Canadian trust.
- A new owner in the calendar year.
- A deceased owner, or a co-owner or personal representative of a deceased owner.
2. Exempt by the availability of the residential property:
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- Newly constructed.
- Not suitable to be lived in year-round, or seasonably inaccessible.
- Uninhabitable for certain number of days because of a disaster or hazardous conditions or renovations.
3. Exempt by location and use of the residential property:
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- Located in an eligible area of Canada and used by you, spouse, or common-law partner for at least 28 days in the calendar year.
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4. Exempt by the occupant of the residential property:
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- Is primary place of residence for you, spouse or common law, or for your child who is attending a designated learning institution.
- At least 180 days in the calendar year are included in one or more qualifying occupancy periods for your ownership.
- Qualifying occupancy periods means at least 1 month in calendar year the following qualifying occupants has continuous occupancy of the residential property:
- An individual with written contract who deal at arm’s length with you.
- An individual with written contract who does not deal at arm’s length with you but pays at least fair rent.
- You, your spouse or common-law partner, who has a Canadian work permit.
- Your spouse or common-law partner, parent, or child who is a Canadian citizen or permanent resident.
- Qualifying occupancy periods means at least 1 month in calendar year the following qualifying occupants has continuous occupancy of the residential property:
This article is intended for general information purposes only and does not constitute professional advice. Income tax law and regulation change frequently and the content on this article may no longer reflect the current state of the law. If you have any specific questions, you should consult a professional services advisor or email us for further advice.