Does The Underused Housing Tax Apply To You?

ADDITIONAL UPDATE! (October 2023)

On October 31, the Canada Revenue Agency announced that it will waive penalties and interest related to the Underused Housing Tax (UHT) for the 2022 calendar year, provided the UHT return is filed and paid by April 30, 2024.

The Minister of National Revenue explained that many homeowners aren’t aware of the new law and its requirements and wants to ensure “every effort” is made to inform homeowners. To determine if you are an “affected owner” CRA has an online self-assessment tool. If you are an affected owner, you will need to file separate UHT returns for each property you owned on December 31 for the 2022 and 2023 calendar years.

UPDATE! (March 2023)

On March 27, the Canada Revenue Agency announced that it will waive penalties and interest related to the Underused Housing Tax (UHT) for the 2022 calendar year provided the UHT return is filed or paid by October 31, 2023.

Although the deadline for filing and paying the UHT remains April 30, 2023, “no penalties or interest will be applied for UHT returns and payments that the CRA receives before November 1, 2023.”

What Is It?

The Underused Housing Tax (UHT) is an annual 1% tax on the ownership of vacant or underused housing in Canada. While primarily applying to non-resident, non-Canadian owners, there are some instances where the UHT could apply to Canadians.

Who Is Impacted?

For our purposes, I’ll bring attention to two groups. An “excluded owner” has no obligations or liabilities under the UHT and includes a “registered charity for Canadian income tax purposes”. However, “affected owners” do have obligations and liabilities under the UHT, and this includes “a Canadian corporation without share capital”. Since this is a new tax that has yet to be applied by the government or interpreted by courts, the UHT’s exact scope is uncertain.

What Should You Do?

You should reach out to your legal and financial advisors as soon as possible to determine if your organization is an “affected owner” under the UHT. If it is, you must file a separate return for each residential property that the organization owns in Canada, even if it is eligible for an UHT exemption. An affected owner’s failure to file, even if they are ultimately exempt from the UHT, can still result in hefty fines – a minimum $10,000 penalty for corporations. If the organization has to file a return for a residential property for the 2022 calendar year, the return is due by April 30, 2023. Since April 30, 2023, falls on a Sunday, the return is on time if the CRA receives it on May 1, 2023. In other words, time is of the essence.