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Canada's Underused Housing Tax (UHT)
The UHT Affects Canadians Also!
What is Residential Property For Purposes of the Underused Housing Tax?
UHT Payment and Annual Return Due Date
The Basics of the UHT - How Much is the Tax?
Penalties For Not Filing the Underused Housing Tax Return
Filers of the UHT Form Must Have an Identification Number (SIN, ITN or BN + RU)
Underused Housing Tax Resources
Government of Canada / Canada Revenue Agency Resources
Provincial/Federal Taxes on Property
Legislation
Underused Housing Tax Regulations
The legislation for the Underused Housing Tax Act was included in Bill C-8, An Act to implement certain provisions of the economic and fiscal update, which received Royal Assent on June 9, 2022. It was originally proposed in the Federal 2021 Budget.
The UHT Affects Canadians Also!
All owners other than excluded owners must file a declaration as to the current use of residential property owned by them and located in Canada.A Canadian citizen or permanent resident will have to file a declaration if they are an owner of the residential property in their capacity as a trustee of a trust (other than a personal representative in respect of a deceased individual) or as a partner of a partnership.
Private Canadian corporations which own residential property will have to file a declaration. Public corporations are considered "excluded owners".
Affected owners are those who are not excluded owners. If they are exempt from the tax affected owners must still file a UHT return, or face penalties.
Who is an Affected Owner, Examples of Affected Owners that will have to file the UHT return even if they are exempt from the tax, in order to claim the exemption.
What is Residential Property For Purposes of the Underused Housing Tax?
A "residential property" does not have to be zoned residential. It includes property that is situated in Canada and that is:
- a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;
- a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real or immovable property owned, or intended to be owned, apart from any other unit in the building together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or
- a prescribed property.
There is no definition yet of "prescribed property" in the UHT regulations. Because the property will be prescribed by regulation, any additions in this category will not require legislative approval.
It's possible that the prescribed property category may in future include vacant land within large urban areas, as promised in the 2021 Liberal Platform (page 23 of the pdf).
What is a Residential Property - from Canada Revenue Agency (CRA).
UHT Payment and Annual Return Due Date
The due date for the Underused Housing Tax return, election for fair market value, and the payment of tax for a calendar year is April 30th of the following calendar year.
The first UHT return due date is May 1, 2023, because April 30th is a Sunday.
The Basics of the UHT / How Much is the Tax?
The UHT is effective January 1, 2022, for the 2022 calendar year.The annual tax is 1% of the value of underused or vacant residential property.
An exemption from the tax may be available to be claimed by the owner of the property.
The tax is based on the taxable value of residential property located in Canada considered to be vacant or underused. Taxable value means an amount that is:
 | a prescribed amount; or if no amount is prescribed, the greater of
| ||||
| A person may elect to use the fair market value of the property. |
Penalties For Not Filing the Underused Housing Tax Return
Many private Canadian corporations, trusts and partnerships will be exempt from the tax, but must still file the return (UHT-2900 Underused Housing Tax Return and Election Form), in order to claim their exemption.The penalties for affected owners are a minimum of:
| $5,000 for individuals |
| $10,000 for non-individuals |
In addition to the minimum above penalties, add:
| 5% of the tax calculated for the calendar year, plus |
| 3% of the tax calculated multiplied by the number of complete months that the return is late. |
If an affected owner fails to file a return by December 31 of the following calendar year, the 5% and 3% penalties will be calculated based on the tax that would be payable if most exemptions were not available.
See s. 47 Penalties in the Underused Housing Tax Act.
Assessment Period
The limitation period for assessments for the UHT, according to s. 36(1) of the Act, is four years after the tax became payable. However, there are exceptions that result in no limitation period, including if a person fails to file a UHT return for a property. In other words, there is no time limit for CRA to assess the person for the tax, penalties and interest for that year.
For more information on this and examples of how a person could easily not realize they should have filed, see the LinkedIn post by Noah Sarna, Commodity Tax Partner at Thorsteinssons Tax Lawyers.
Tax Tip: The penalties are huge - talk to your tax advisor to determine if you are an affected owner, and if you're unsure, file the return!
Filers of the UHT Form Must Have an Identification Number
An individual who is a Canadian citizen or permanent resident must use their social insurance number (SIN) to file their return.
An individual who is not a Canadian citizen or permanent resident who already has a SIN will use their SIN to file their return. If they do not have a SIN, they must use an individual tax number (ITN) to file their return. If they do not have an ITN they must apply for one using form T1261 Application for a Canada Revenue Agency Individual Tax Number (ITN) for Non-Residents.
A corporation must use a business number (BN) with an Underused Housing Tax (RU) program account identifier to file their return.
| If they already have a BN, they will have to register their RU program account before they can file a return. |
| If they do not have a BN they must apply for one and register their RU program account before they can file a return. |
| Corporations will be able to register their RU program account online after February 6, 2023. |
The Filing the Return information from CRA will have a link for corporations to use to register their RU program account online.
Tax Tip: Get your tax identification number as soon as possible if you don't have one already!
Underused Housing Tax Resources
Quick Reference Chart for the Underused Housing Tax - The Video Tax News team has once again spent a great deal of time to analyze complicated legislation to try to make it easier to understand for accounting and financial professionals, and have created this very useful tool. If you'd like a brandable version of this chart to distribute to clients see Brandable Quick Reference Chart - Underused Housing Tax (UHT).
Other tax and accounting organizations have also worked hard to try to make this legislation understandable:
UHTA: Corporations, partnerships and trustees beware! by Ben Berci, Baker Tilly Canada
- includes very useful Underused Housing Tax (UHT) Flowchart
Underused housing tax - requirements and exemptions by Bruce Ball, FCPA, FCA, CFP
Tax Identifier Number for the Underused Housing Tax - CPA Canada News January 27, 2023
Underused Housing Tax - Fazzari+Partners LLP, Chartered Professional Accountants
Trust and estates beware of the new Underused Housing Tax by John Oakey, National Tax Director for Baker Tilly Canada
Video Tax News Life in the Tax Lane December 2022
Government of Canada / Canada Revenue Agency Resources
Underused Housing Tax Technical Information
UHT-2900 Underused Housing Tax Return and Election Form
Budget 2021 Annex 7: Consultations on Other Tax Measures: Supplementary Information - search (ctrl-f) or scroll down to Tax on Unproductive Use of Canadian Housing by Foreign Non-resident Owners.
Economic and Fiscal Update 2021 - Tax Measures - Underused Housing Tax
Excise and GST/HST News - No. 112 - Underused housing tax program
Provincial/Federal Taxes on Property
BC Speculation and Vacancy Tax and City of Vancouver Empty Homes Tax
Ontario Taxes on Property - includes Foreign Buyers Tax, Ottawa and Toronto Vacant Home taxesRevised: February 04, 2023