The Federal Government recently introduced the Underused Housing Tax Act (UHTA) and the related Underused Housing Tax Return and Election Form, UHT-2900. The UHTA differs from the Vacant Unit Tax imposed by the City of Ottawa. Even if you already filed a declaration with the City of Ottawa recently, you may be subject to the Underused Housing Tax (UHT) and have additional filing requirements with CRA. If applicable, UHT results in a 1% tax annually on the value of the subject property.
Generally, the UHT applies to non-resident, non-Canadian owners of vacant or underused residential housing in Canada. However, there are some common situations where a UHT-2900 tax return is still required for residential real estate held, even if there is no non-resident ownership, such as by:
- a Canadian company with all Canadian shareholders or
- Canadian partners of a Canadian partnership.
Therefore, even if an owner qualifies for a tax exemption and no tax is payable to CRA, a UHT-2900 tax return may still be required. Penalties will apply for a failure to file a return even if no tax is payable.
What are the penalties?
Failure to file the return by this date could result in a penalty of at least $5,000 for individuals and $10,000 otherwise, even if no UHT is owing.
Who is impacted by the UHT rules?
The legal owners of residential property which include private corporations, partnerships and trusts, as well as individuals owning residential homes in Canada on December 31 of each year.
When is the UHT return due for 2022 calendar year?
Each owner (who is not an excluded owner below) of a residential property needs to file an annual return by May 1st, 2023. However, CRA is making an exception for 2022 filings by waiving interest and penalties for any late-filed underused housing tax (UHT) return and for any late-paid UHT payable, provided the return is filed or the UHT is paid by October 31, 2023. This extension is for the 2022 filing only.
Who is excluded from filing?
Excluded owners are not required to file a return and the tax does not apply to them. “Excluded owners” include:
- Individuals who are Canadian citizens and permanent residents if they own a residential property directly;
- Companies listed on a public Canadian stock exchange;
- Registered Canadian charities;
- Canadian cooperative housing corporations;
- Hospital authorities; municipalities; public colleges;
- School authorities and universities; and,
- Indigenous governing bodies.
Please note that individuals owning residential property in their quality of trustees of a trust or as a partner of a partnership, Canadian trusts, corporations not listed on a Canadian stock exchange, and partnerships are not considered “excluded owners”. Therefore, they are subject to the Act and maybe are required to file a return even if no tax is payable.
CLICK HERE to review our guide to determining your filing obligations and tax exposure.
Additional information on the UHT can be found on the Government of Canada website.