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Home  ->  Canada  ->  Federal 2021 Budget ->  Real Estate  ->  Underused Housing Tax

Canada's Underused Housing Tax (UHT)

Penalties now waived if 2022 UHT Returns are filed by April 30, 2024! 2023 returns must also be filed by April 30, 2024, including for specified Canadian corporations, trusts and partnerships.

See October 31, 2023 news release Government of Canada extends deadline for homeowners to file the 2022 Underused Housing Tax return.

Legislation

The UHT Affects Canadians Also! - including co-owners of property

bulletAffected owner
bulletCanadian Citizen or Permanent Resident - Trustee of a Trust (e.g. joint owner without beneficial ownership)
bulletCanadian Private Corporation
bulletNon-Resident Non-Canadians

2023 Fall Economic Update Changes to the UHT - are not yet in effect!

Who is an Owner of Residential Property?

What Does "Residential Property" Mean?

Partnerships And The Underused Housing Tax

Farmers and the UHT Return

The Basics of the UHT - How Much is the Tax? The Form

Completing Form UHT-2900

UHT Payment and Annual Return Due Date

Penalties For Not Filing the Underused Housing Tax Return

Filers of the UHT Form Must Have an Identification Number (SIN, ITN or BN + RU)

bulletDigital Access Code Online

Will My Accountant/Tax Preparer File the UHT Return For Me? Maybe Not!

My Accountant Says I Don't Need to File the UHT Return - will they pay the penalty if they are wrong?

Underused Housing Tax Resources

Government of Canada / Canada Revenue Agency Resources - expanded Q&A UHTN15

Provincial/Federal Taxes on Property

Legislation

Underused Housing Tax Act

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!

Affected Owners

All owners other than "excluded owners" must file a UHT return if they own residential property located in Canada, on December 31st of the calendar year.

Affected owner is a term used by Canada Revenue Agency (CRA) to describe those who must file an Underused Housing Tax (UHT) return.  It is not a term used in the legislation for the UHT. 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.

From CRA:

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.

Determine if you are an affected or excluded residential property owner - keep in mind that a property does not have to be zoned residential to be considered a residential property for the UHT.

Effective for the 2023 calendar year, if the draft legislation is tabled as a Bill and passed (as of February 14, 2024 it has not even been tabled), specified Canadian corporations, partners of specified Canadian partnerships, and trustees of specified Canadian trusts, will be considered excluded owners instead of affected owners, and will not have to file the UHT return. They will still have to file for the 2022 calendar year.

Canadian Citizen or Permanent Resident - Trustee of a Trust

Is your name on the title of a residential property, but you do not have beneficial ownership? This is a bare trust.

A "bare trust" owning residential property is affected by the UHT, and the trustee must file the UHT return. Most people are not even aware of what constitutes a bare trust.  There are many examples, including when a property is placed into joint ownership with one of the joint owners having legal ownership but not beneficial ownership.

A few examples, but there are many more:

  1. Parent who puts adult child on title for estate-planning purposes only, no beneficial ownership transferred. The residence is the primary place of residence of the parent.
  2. Adult child who puts parent on title for financing purposes only, no beneficial ownership transferred. The residence is the primary place of residence of the adult child.
  3. Trustee of a family trust which holds residential property in trust for the beneficiaries.

These are very common situations.

In situation #1, the adult child must file the 2022 UHT return as trustee of a trust. If the parent is a citizen of Canada, then the trust is a specified Canadian trust, and no UHT will be payable.

In situation #2 the parent must file the 2022 UHT return as trustee of a trust. If the adult child is a citizen of Canada, then the trust is a specified Canadian trust, and no UHT will be payable.

In situation #3, the trustee must file the 2022 UHT return. If all beneficiaries of the trust are citizens of Canada, then the trust is a specified Canadian trust, and no UHT will be payable.

New November 21, 2023: Effective for the 2023 calendar year, if the trust is a specified Canadian trust, it will be considered an excluded owner and will not have to file the UHT return. However, the 2022 UHT return must still be filed.  See Underused Housing Tax in the 2023 Fall Economic Statement.

See CRA's Underused Housing Tax Notice 15 (UHT 15) Questions about trusts, which has been updated to provide a lot more detail, and examples.

A Canadian citizen or permanent resident will have to file a UHT return if they are an owner of the 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.  Most of these people will likely be exempt from the tax, but will pay a minimum $5,000 penalty per person per property if they do not file.

For more information see Do you have a bare trust? What that means for Underused Housing Tax (UHT) by RHN Chartered Professional Accountants.

Tax Tip: If you're in doubt as to whether you have to file a UHT return, get professional advice, or just file the return!

Canadian Private Corporation

Publicly-traded corporations are excluded owners, while private corporations are not.

A Canadian private corporation must file a 2022 UHT return if they own residential property in Canada on December 31st of the calendar year.  Most Canadian private corporations will likely be exempt from the tax as they will be considered a specified Canadian corporation, but will pay a minimum $2,000 penalty per failure to file (reduced from $10,000 per failure by the 2023 Fall Economic Statement) if they do not file.  

New November 21, 2023: Specified Canadian corporations will be considered excluded owners for the 2023 and subsequent calendar years, and will not have to file the UHT return, if the draft legislation is included in a Bill, tabled in the House of Parliament, and passed. This has not yet happened, as of February 14, 2024.. See Underused Housing Tax in the 2023 Fall Economic Statement.

Non-Resident Non-Canadians

Non-resident non-Canadians must file a UHT return if they own residential property in Canada on December 31st of the calendar year. Whether the tax is payable will depend on whether they are eligible for any exemptions.

2023 Fall Economic Update Proposed Changes to the UHT

See Underused Housing Tax in the 2023 Fall Economic Statement.

Elimination of Filing Requirement for Certain Owners, But Not for 2022 Calendar Year - And Not Yet for 2023 Calendar Year

Currently, exemptions from the UHT can be claimed by:

bulletspecified Canadian corporations
bulletpartners of a specified Canadian partnership
bullettrustees of a specified Canadian trust

However, to claim the exemption, these individuals or corporations must file the UHT return. For the 2023 calendar year, it is proposed that these individuals and corporations will be considered "excluded owners" and will not have to file the UHT return. They still must file for the 2022 calendar year, by April 30, 2024.

As of February 16, 2024, the draft legislation for these changes has not yet been included in a Bill, tabled in the House of Parliament, and passed, which means that it is possible that these Canadians will have to file the UHT return again for the 2023 year, by April 30, 2024.

Proposal to Reduce Minimum Failure to File Penalties

Effective for the 2022 and subsequent calendar years, proposal to reduce the minimum penalty:

bulletfor individuals, from $5,000 to $1,000 per failure
bulletfor non-individuals, from $10,000 to $2,000 per failure

Proposal to Exempt Certain Employee Accommodations

bulletProposal to introduce a new UHT exemption for residential properties held as a place of residence or lodging for employees
bulletfor residential properties anywhere in Canada other than in a population centre within either a census metropolitan area or a census agglomeration having 30,000 or more residents
bulletapplicable to 2023 and subsequent calendar years, but not 2022 calendar year

Proposed Technical Changes

bulletprovide that unitized ('condominiumized') apartment buildings are not "residential property" for UHT purposes, effective for 2022 and subsequent calendar years; and
bulletensure that an individual or a spousal unit can claim the UHT "vacation propert" exemption for only one residential property for a calendar year, effective for 2024 and subsequent calendar years (not for 2022 or 2023 calendar years).

Summary of Proposed Changes

Ottawa to exempt Canadians from underused housing tax filings, with one exception from the Chartered Professional Accountants of Canada.

Who is an Owner of Residential Property?

An owner is a person that is identified as an owner in the land registration system or other similar system, or that could reasonably be considered to be an owner based on such a system, and includes a person that

bulletis a life tenant under a life estate in respect of the residential property
bulletis a life lease holder in respect of the residential property,
bullethas, under a long-term lease, continuous possession of the land on which the residential property is situated, or
bulletis a prescribed person,

but does not include

bulleta person that gives continuous possession of all the land on which the residential property is situated to persons referred to in paragraph (b) or (c), or
bulleta prescribed person.

The regulations do not yet include any definition for a prescribed person.

What Does "Residential Property" Mean

A "residential property" does not have to be zoned residential.

In the Underused Housing Tax Act, residential property is property (other than prescribed property) situated in Canada that is:

bulleta detached house or similar building, containing not more than 3 dwelling units, together with that portion 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;
bulleta 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
bulleta prescribed property.

A dwelling unit means a residential unit that contains private kitchen facilities, a private bath and a private living area.

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).

Partnerships And The Underused Housing Tax

New November 21, 2023: Effective for the 2023 and subsequent calendar years (but not 2022), partners of specified Canadian partnerships (generally, a partnership whose partners are exclusively Canadian), will be considered excluded owners, and will not have to file the UHT return.  They must still file the 2022 UHT return in order to claim their exemption.  See Underused Housing Tax in the 2023 Fall Economic Statement.

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?

As CRA says: if two individuals characterize their relationship as a partnership for Canadian income tax purposes, it may be difficult for them to characterize their relationship as something else for UHT purposes.

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 each person has to file the UHT return? The answer to this question seems to be YES, even if the rental income is characterized on the tax return as property income, not business income.

See UHTN15 updated September 29, 2023 from CRA: Questions about partnerships, which addresses joint owners as well as joint owners of a rental property, but still will not provide concrete answers about partnership status for many people.

Tax Tip:  If in doubt as to whether filing the UHT return is necessary, get legal advice, or just file the return to avoid the huge penalties!

Farmers and the UHT Return

Most farms across Canada must file a UHT return, because most are either partnerships or corporations. For some of the issues related to farmers see Farm groups call for exemption to filing Underused Housing Tax forms.  However, as per the 2023 Fall Economic Statement, if the partnership is a specified Canadian partnership, the UHT return will not have to be filed.  See above.

Situation re Farmers:

bulletLand is purchased by a couple as joint owners, with a view to living there eventually.
bulletSeveral years later owners start building their home.
bulletAround the same time, they begin a farming (or other) business.
bulletTheir farming (or other) business is registered as a partnership, and the partnership has a business number with CRA.
bulletOnly the joint owner individuals are on the title for the property - the partnership is not on title as a registered owner. The property was not transferred to the partnership.

Question:  Is the residential property owned by the couple in their capacity as partners of a partnership?  The answer to this question is YES. It may be necessary to get legal advice to be sure of the answer in your particular situation.

The Basics of the UHT / How Much is the Tax? / The Form

The UHT is effective January 1, 2022, for the 2022 calendar year, and is payable by May 1, 2023.

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.  Exemptions are claimed by filing the UHT form.

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:

bulleta prescribed amount; or if no amount is prescribed, the greater of
bulletthe assessed value as assessed by a provincial or federal government, and
bulletthe residential property's most recent sale price on or before December 31 of the calendar year.
bulletA person may elect to use the fair market value of the property.

Completing Form UHT-2900

A separate return must be filed by each owner for each property owned, using Form UHT-2900 Underused Housing Tax Return and Election Form.  The pdf form has 2 pages of "Additional Information" at the end the provides information that is useful in completing the form.

Even for owners who are exempt from the tax, the following information must be completed on the form:

bulletPart 1: Information about the owner
bulletLegal name of owner
bulletSocial insurance number (SIN), individual tax number (ITN, or business number (BN-RU)
bulletMailing address & telephone number, including 3-letter country code - you can find the 3-letter country code on the iso.org website (CAN for Canada).
bulletContact person (optional)
bulletCitizenship of the owner who is an individual
bulletIf property is owned as a partner of a partnership:
bulletpartnership account number (if applicable) - must be an RZ business number - partnerships without an RZ business number will have to file using the pdf forms. The pdf forms can be faxed or mailed.  The addresses and fax numbers are on the form.  It took our fax 17 tries over a few days to successfully file our 2 returns (in 1 pdf file).
bulletIf property is owned as a trustee of a trust:
bullettrust account number (if applicable)
bulletPart 2: Information about the residential property:
bulletphysical address
bulletproperty ID used in the land registration or similar system
bulletproperty tax or assessment roll number (if applicable)
bullettype of residential property
bulletyear in which you became an owner of the property
bullettype of ownership (sole, joint tenancy, or tenants in common)
bulletyour % ownership on December 31st of the calendar year
bullet% ownership of any other owner having an interest in the property of 10% or more
bulletassessed value of the property that is (or includes) the residential property
bulletmost recent sale price on or before December 31st of the calendar year (i.e., the purchase price) (see *Note below)
bulletthe taxable value is the greater of assessed value and most recent sale price.

The following parts of the form are completed depending on your circumstances:

bulletPart 3: Multiple residential properties:
bulletonly applies to owners who are individuals and are neither Canadian citizens nor permanent residents of Canada, does not apply to corporations.  Note that a separate return must be filed for each property, by each owner.
bulletPart 4: Exemption for primary place of residence:
bulletOnly owners who are individuals may qualify for this exemption.  If you qualify, indicate this and go to Part 9.
bulletPrimary place of residence is not determined in the same manner as the Income Tax Act determination of principal residence.
bulletSee UHTN6 Exemption for residential properties that are used as a primary place of residence on the CRA website.
bulletPart 5: Exemption for qualifying occupancy:
bulletfor situations where your ownership of the property has one or more qualifying occupancy periods (including only periods of continuous occupancy that are one month or longer) totalling at least 180 days in the calendar year.
bulletSee UHTN7 Exemption for Qualifying Occupancy on the CRA website.
bulletPart 6: Other exemptions:
bulletMany other exemptions are listed in this part of the form.  If you tick yes to qualifying for one or more of these exemptions, go to Part 9.
bulletOne exemption is for property in an "eligible area" of Canada.  You can use the Underused housing tax vacation property designation tool and input the postal code of the property to determine if it is eligible for the exemption for an "eligible area".
bulletSee Underused Housing Tax Notices UHTN4, UHTN5, and UHTN8 to UHTN14.

The following parts of the form are completed when there is no exemption from the tax:

bulletPart 7: Fair market value (FMV) election:
bulletIf you are not exempt from the tax, you can choose to use the FMV of the property, instead of its taxable value calculated in Part 2, to calculate the tax owing.  To do this, you must have a written appraisal prepared by an accredited real estate appraiser operating at arm's length from you, with an effective date for FMV that is between January 1 of the previous calendar year and April 30 of the current year.
bulletPart 8: Calculation of tax payable:
bulletMultiply your % ownership x the taxable value x 1% = UHT owing
bulletExample:  you own 50%, taxable value is $1 million:
bullettax = 50% x $1 million x 1% = $5,000

The last part of the form is completed by all filers:

bulletPart 9:  Election and return certification:
bulletto certify that the information on the return is correct and complete, each filer must sign and date this part.

*Note: The Canadian Home Builders' Association (CHBA) received an interpretation letter from CRA stating that a person need not report the assessed value and most recent sales price of a residential property in situations where no tax is payable in respect of the residential property.  For links to the interpretation, see the Video Tax News April 2023 Life in the Tax Lane video, which indicates it is not clear if this interpretation is meant just for CHBA members, or for the general public, and there restrictions to this interpretation.

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.  See below re CRA announcement re penalties & interest waived.

Penalties For Not Filing the Underused Housing Tax Return

Penalties now waived if 2022 UHT Returns are filed by April 30, 2024!

See October 31, 2023 news release Government of Canada extends deadline for homeowners to file the Underused Housing Tax return.

March 27, 2023 CRA Announcement - UHT penalties and interest will be waived for any late-filed UHT return and for any late-paid UHT payable, provided the return is filed or the UHT is paid by Tuesday, October 31, 2023.  The deadline is still April 30, 2023 (May 1, since April 30th is a Sunday), but penalties and interest will not be applied for UHT returns and payments that the CRA receives before November 1, 2023.

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.

Effective for the 2022 and subsequent calendar years, the minimum penalty is reduced:

bulletfor individuals, from $5,000 to $1,000 per failure
bulletfor non-individuals, from $10,000 to $2,000 per failure

See Underused Housing Tax in the 2023 Fall Economic Statement.

In addition to the minimum above penalties, add:

bullet5% of the tax calculated for the calendar year, plus
bullet3% 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, you may want to file the return to avoid penalties - but see announcement above!

Filers of the UHT Form Must Have an Identification Number (SIN, ITN or BN + RU)

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.

bulletIf they already have a BN, they will have to register their RU program account before they can file a return.
bulletIf they do not have a BN they must apply for one and register their RU program account before they can file a return.
bulletCorporations will be able to register their RU program account online after February 6, 2023.

The Filing the Return information from CRA has 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?

This is not part of annual tax preparation, so don't expect that the tax preparer/accountant who files your tax returns for you will automatically file the Underused Housing Tax (UHT) return.

Many firms are deciding to not file these returns, and those that will prepare and file them will probably charge a substantial fee.

My Accountant Says I Don't Need to File the UHT Return

Not all accountants are well-versed in the complications of who has to file the UHT return.  If your accountant says you don't have to file, make sure they know all your circumstances, put their advice in writing, including that they will pay the penalty of $5,000 per individual per property or $10,000 per non-individual per property if they are wrong.  If they won't do this, don't rely on their advice only.

Underused Housing Tax Resources

Many tax and accounting organizations are trying diligently to make this legislation understandable:

Advisor.ca September 25, 2023: CRA offers no relief on stiff penalties for late-filing UHT returns

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

Underused Housing Tax Technical Information including Underused Housing Tax Notices (UHTNs)

Expanded September 2023: Questions and Answers About the Underused Housing Tax

UHT-2900 Underused Housing Tax Return and Election Form

Underused Housing Tax Notices

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

BC Foreign Buyer Tax

Ontario Taxes on Property - includes Foreign Buyers Tax, Ottawa and Toronto Vacant Home taxes

Revised: February 20, 2024

 

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