NOTICE TO CHARTHOUSE CLIENTS: WHAT YOU NEED TO KNOW ABOUT THE NEW UNDERUSED HOUSING TAX IN CANADA (“UHT”).
This posting is to inform you of the new Underused Housing Tax (“UHT”) in Canada, which came into effect on January 1, 2022. The UHT is an annual 1% tax on the ownership of vacant or underused housing. The tax usually applies to non-resident, non-Canadian owners but the filing obligation can apply to Canadian owners, most significantly private corporations. If your company is the registered owner of any residential property it may be required to file a return in respect of the UHT before April 30th and there are significant financial penalties for non-compliance.
Details of the Tax:
Under the UHT, homeowners will be required to pay a tax on any residential property that is not being used as their primary residence for at least six months of the year. This includes second homes, vacation homes, and any other properties that are not being fully utilized. The aim of the UHT is to encourage homeowners to use their properties to their full potential and to address the issue of affordable housing in Canada. The UHT is distinct from the Land Owner Transparency Act and the corporate transparency registry.
Penalties for Non-Compliance:
The penalty for non-compliance with the UHT can be severe. Regardless of whether their property is underused, captured residential landowners who fail to file a return by the deadline may be subject to a fine of up to $10,000, and in some cases, the property may be subject to expropriation. It is therefore essential for landowners to comply with this tax to avoid any potential penalties.
Who is required to file:
The following categories of landowners which owned residential property on December 31st last are required to file a UHT return:
- a Canadian corporation whose shares are not listed on a Canadian stock exchange designated for Canadian income tax purposes (i.e. private corporations)
- individuals who are not a Canadian citizens or permanent residents
- individuals who are Canadian citizens or permanent residents and who own a residential property as a trustee of a trust (other than as a personal representative of a deceased individual)
- any person – including an individual who is a Canadian citizen or permanent resident – that owns a residential property as a partner of a partnership
- a corporation that is incorporated outside Canada
- a Canadian corporation without share capital
- All landowners who own residential properties in Canada that are not being used as their primary residence for at least six months of the year are required to report their properties to the Canada Revenue Agency (CRA). The CRA will then assess the tax owed based on the property’s value and the amount of time it is underused.
The following categories of landowners which owned residential property on December 31st last are not required to file a UHT return:
- individuals who are Canadian citizens or permanent residents – unless included in the list of affected owners above
- any person – including an individual who is a Canadian citizen or permanent resident – that owns a residential property as a trustee of a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT) for Canadian income tax purposes
- a Canadian corporation whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
- a registered charity for Canadian income tax purposes
- a cooperative housing corporation for Canadian GST/HST purposes
- an Indigenous governing body or a corporation wholly owned by an Indigenous governing body
Exemptions
Ownership of a residential property may be exempt from the Underused Housing Tax for a calendar year depending on:
- the type of owner
- the availability of the residential property
- the location and use of the residential property
- the occupant of the residential property
Remember if you are an affected owner of a residential property in Canada on December 31 you still have to file an Underused Housing Tax return for the residential property for the calendar year, even if your ownership qualifies for an exemption.
Deadline for Filing:
The deadline for filing the underused housing tax is April 30th of each year. If the deadline is missed, the landowner will be subject to penalties, including fines and potential expropriation.
How to file:
Affected residential landowners are required to complete the UHT-2900 Underused Housing Tax Return and Election Form. The completed form should be submitted electronically or by mail to the CRA before the deadline.
Charthouse Lawyers
If you would like Charthouse Lawyers to assist your UHT filing, please contact info@charthouselawyers.ca or your usual Charthouse Lawyers contact.
