Underused Housing Tax (UHT)
Introduction
The government of Canada introduced a national, annual 1% tax on the value of non-resident, non-Canadian-owned residential real estate in Canada that is considered to be vacant or underused, subject to certain exceptions. This was passed into law with Bill C-8 receiving Royal Assent on June 9, 2022. This tax is effective for 2022, and later calendar years. The initial Underused Housing Tax returns, for the 2022 calendar year, would be required to be filed on or before April 30, 2023.
Mandatory Declaration by Residential Property Owners
Every owner of a residential property, other than an “excluded owner”, would be required to file an annual declaration with the Canada Revenue Agency (CRA) for each residential property they own. In order to file a declaration with the CRA, certain owners may need to pre-register with the CRA in advance of filing their declaration.
A declaration in respect of a property for a calendar year would be required to be filed on or before April 30 of the following calendar year. This means that an owner’s declaration in respect of a property for the 2022 calendar year would be required to be filed on or before April 30, 2023.
Failure by an owner to file a declaration in respect of a property for a calendar year could result in significant consequences for the owner, as well as penalties and interest.
Excluded Owners
Certain owners of residential property, referred to as “excluded owners”, would be relieved from the declaration requirement. An owner that is, in respect of a calendar year, an excluded owner would therefore not be subject to the UHT in respect of property for the calendar year.
Among others, excluded owners, in respect of a calendar year, would include the following, as of December 31 of the calendar year:
An individual that is a Canadian citizen or a permanent resident of Canada, except where the individual holds an interest in property:
as a partner of a partnership, or
as a trustee of a trust, but not including a personal representative of a deceased individual or the estate of a deceased individual
As an owner of a property that you do not occupy, you may be required to file a disclose. These may or may not also be subject to the 1% UHT tax. The filing obligation also extends to non-excluded owners that have no tax payable.
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