Introduction
The Government of Canada has introduced the Underused Housing Tax Act (UHTA) which came into effect on January 1, 2022. The filing and payment obligations generally apply to non-resident non-Canadian owners residential property, but some Canadian owners are also subject to filing obligations.
The filing due date is April 30th of the next calendar year and note that this is an annual filing. Significant penalties are imposed for failing to file an annual return; minimum of $5,000 for individuals and $10,000 for corporations. It is worth repeating, these penalties are for failure to file the return; even if you think the property is not subject to the tax because it is occupied, you might still need to file.
The definition of “residential property” and “owner” are relatively straight forward and can be read about here. One area of this Act that can catch people off guard is the definition of “excluded owner” and “affected owner” which is what I want to focus on here because that will determine the filing obligations.
Excluded Owner
Since I am writing for individuals and small business owners, I will only address the excluded owner definitions most relevant to you (hopefully). For details check out the other links in this post or contact us directly.
Excluded owners do not have to file or pay any taxes under the Act.
Canadian citizens and permanent residents are excluded owners unless they are the owner of residential property as either:
- a trustee of a trust (except if you are the personal representative of a deceased individual, in which case you are an excluded owner of the residential property)
- a partner of a partnership
One important group that is not excluded are private corporation holding residential property. This means holding companies owning residential real estate (ie. for the purpose of asset protection, financing, etc), will be required to file even if they are ultimately not liable for any tax under the Act. This means that whether the private corporation is owned by Canadians or not, it must file a return.
Affected Owners
Affected owners, as the name implies, is everyone affected by the Act which means all affected owners must at least file a return, and may potentially be required to pay the Underused Housing Tax.
The CRA defines affected owners as everyone who is not an “excluded owner” in the definition above. Some important examples of affected owners include:
- Individuals who are not citizens or permanent residents of Canada
- Canadian citizens and PR who are either acting as a trustee (other than as a personal representative of a deceased individual) or as a partner of a partnership
- Note that the immigration status of the beneficiary or partner is not relevant, the affected owner must still file if everyone involved is Canadian or PR.
- Private corporations whether Canadian or not.
March 27th 2023 Update
On March 27th 2023, the CRA announced that they would provide administrative relief for the 2022 tax year. The due date for the 2022 tax year is still May 1st 2023 but no penalties or interest will apply for UHT returns and payments that the CRA receives by October 31st 2023.
Additional Resources
- The CRA’s published information page provides a good overview of the new Act here: Introduction to the Underused Housing Tax.
- Information on Filing a Return and Paying the Underused Housing Tax
- For tax professionals or those who want more details, see the forms, tools and regulations here: Underused Housing Tax Technical Information.
- The Act and Regulations can be found here: Underused Housing Tax Act.