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Canada's Underused Housing Tax (UHT)
The UHT Affects Canadians Also! - including co-owners of property
Partnerships And The Underused Housing Tax
Other Affected Owners, Including Private Corporations
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)
Will My Accountant/Tax Preparer File the UHT Return For Me?
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.
Partnerships And The Underused Housing Tax
Under Canadian provincial and territorial common law statutes, a partnership is defined as the relation (or relationship) that subsists (or exists) between persons carrying on a business in common with a view to profit. This is from Canada Revenue Agency's Income Tax Folio S4-F16-C1, What is a Partnership?
See our article Rental Income - Property Income or Business Income for Tax Purposes?
Further distinction is made by CRA between co-owners and partners In their Ownership article.
Note: For those who own jointly own rental properties and are earning rental income, but not as a partnership (thus not a "business"), the legislation does not seem to indicate that a UHT return would have to be filed. See the folio above for more information. The legislation indicates that the property must be owned in the taxpayer's capacity as a partner of a partnership in order for a UHT return to be necessary. However, the T776 Statement of Real Estate Rentals for in tax software requires the taxpayer to indicate whether they are a sole proprietorship, partnership, or co-owner. Will this affect whether the person has to file the UHT return?
Situation:
 | Land is purchased by a couple as joint owners, with a view to living there eventually. |
| Several years later owners start building their home. |
| Around the same time, they begin a farming (or other) business. |
| Their farming (or other) business is registered as a partnership, and the partnership has a business number with CRA. |
| Only the joint owner individuals are on the title for the property - the partnership is not on title as a registered owner. |
Question: Is the residential property owned by the couple in their capacity as partners of a partnership? The same question could be asked no matter what type of business is operated on the property. The logical answer to this question is perhaps no, because the partnership business didn't exist when the property was purchased, and the partnership is not a registered owner. However, once it is used in a partnership business, a co-owner must determine whether the property is now held in their capacity as a partner. It may be necessary to get legal advice to be sure of the answer, but below is what we've learned:
Question: Would it not be more reasonable to only require Canadian citizen joint owners to file the return if their partnership is actually the owner of the property? Yes, but unfortunately, one probably can't tell from the registration that a partnership owns the property.
In Ontario, BC and likely other provinces, real estate cannot be registered in the name of a partnership. In BC, when real estate is owned by a partnership, each partner must be registered on the title as an individual, and one cannot tell from the title that it is owned by a partnership. The BC Land Title and Survey Authority Practice Manual says re Partnerships: "Generally, an estate or interest in the name of a partnership is not registrable, because the names of each partner must appear on title. However, a judgment in the name of a partnership is registrable."
From CPA Canada Underused housing tax - requirements and exemptions, by Bruce Ball, FCPA, FCA, CFP:
| Which owners must file the UHT return and pay the tax? private corporations, including Canadian controlled private corporations (CCPC), partnerships and trusts (other than estates) that own (note 3) residential property in Canada and are not eligible for an exemption. |
Note 3: A residential property’s owner is the title holder under the relevant land registration system.
Tax Tip: If in doubt as to whether filing the UHT return is necessary, get legal advice!
Other Affected Owners, Including Private Corporations
Private Canadian corporations which own residential property will have to file a return. 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 per individual per property, or |
| $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 business 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.
Digital Access Code Online
To file the UHT return online using the webform, you will have to obtain a Digital Access Code Online.
Tax Tip: Get your tax identification number or Digital Access Code Online as soon as possible if you don't have one already!
Will My Accountant/Tax Preparer File The UHT Return For Me?
Many tax preparers are deciding to not file these returns, and those that will prepare and file them will probably charge a substantial fee.
Underused Housing Tax Resources
Many tax and accounting organizations are trying diligently to make this legislation understandable:
LinkedIn Post by Cathy Williams, CPA, CA with practical notes on the Underused Housing Tax (UHT) filing - very useful, including the comments on the post.
Quick Reference Chart for the Underused Housing Tax - from the Video Tax News team
Escape Room 2 - The NEW Real Estate Owner Tax Game - High Stakes Edition by Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr - answer a series of questions to see if you escape filing the UHT return, and if you escape paying the tax.
LinkedIn post by Noah Sarna, Commodity Tax Partner at Thorsteinssons Tax Lawyers - includes examples of when a person could easily not realize they should be filing the UHT return.
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: March 14, 2023