Published March 10 and updated March 27, 2023
Do you own residential real estate in Canada in a corporation, partnership or trust (not personally)?
Do you own residential real estate in Canada AND are neither a Canadian citizen nor a permanent resident?
If so, you may need to file an Underused Housing Tax (UHT) return by April 30 regardless of whether your property is underused or vacant.
There are significant penalties if the UHT return is applicable to you and not filed on time.
UPDATE: To provide more time for affected residential property owners to comply, the CRA announced on March 27, 2023 that the application of penalties and interest will be waived for any late-filed Underused Housing Tax (UHT) return as long as the return is filed (and any tax is paid) by October 31, 2023. A link to the text of the announcement can be found on the CRA website here.
The federal Underused Housing Tax (UHT) was intended to target vacant or underused residential real estate owned, directly or indirectly, by foreign nationals who are neither Canadian citizens nor permanent residents. The UHT is equal to 1% of the value of the residential property.
Unfortunately, in designing the Underused Housing Tax Act (“UHTA”) the government has effectively required everyone who owns residential real estate in Canada (unless held personally by a Canadian citizen or permanent resident) to file a UHT return even if they are exempt of the UHT.
April 30th of the following year (e.g., April 30, 2023 for the 2022 year).
Registered owners of residential real estate in Canada as of December 31, other than an “excluded owner”, will be required to file an annual return for each residential property by April 30 of the following year.
Excluded owners are exempt from filing a UHT return. As of December 31 of a calendar year, excluded owners include:
For most persons reading this, the only exemption that might be applicable to them is #1 (above) meaning all other owners of residential real estate in Canada will need to file a UHT return. If you are not an excluded owner, you are referred to as an affected owner.
If you fail to file your return for a residential property for a calendar year by April 30 of the following calendar year, you have to pay a penalty that is the greater of the two following amounts:
If you fail to file your return for a residential property for a calendar year by December 31 of the following calendar year, there is an adjustment to the penalty calculation that could result in even higher penalties.
Persons who, on December 31 of a calendar year, are affected owners of residential properties that are situated in Canada, have to pay the UHT on each residential property situated in Canada that they own unless their ownership of a particular residential property is exempt for the calendar year. For a more comprehensive explanation of these exemptions, go to https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html?utm_campaign=not-applicable&utm_medium=vanity-url&utm_source=canada-ca_cra-uht
The UHT applies to the “taxable value” of a residential property in respect of a calendar year, which is the greater of the assessed value of the property in respect of the calendar year for property tax purposes, and the property’s most recent sale price. Owners can also elect to use the fair market value of the property.
The amount of UHT an owner is required to pay in respect of a residential property for a calendar year is determined by multiplying the owner’s ownership interest in the property by the property’s taxable value by the 1% rate of tax.
The UHT return along with the instructions can be found in the link below: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/uht-2900.html
For many affected owners that are Canadian citizens or permanent residents who hold real estate indirectly, the UHT return will primarily require them to complete basic information about themselves, disclose information about the property that will come from their property tax assessment, and to confirm (where applicable) what exemption applies.
Where you send the return will depend on:
Please see more details in “Filing the return” section in link below:
If an amount of UHT owing is less than $50,000, you can attach a cheque or money order to your UHT return. You can also pay amounts of less than $50,000 owing electronically. For more information on how to make your payment, go to https://www.canada.ca/en/revenue-agency/services/payments-cra.html. For amounts owing that are $50,000 or more, you must make your payment through an accepted financial institution.
If you do not pay an amount of UHT owing for a calendar year to the Receiver General by April 30 of the following calendar year, interest will be calculated and added to that amount.
Disclaimer: This article is intended to inform readers in general terms. It is not intended to provide any tax or business advice. Please consult your Stern Cohen advisor if you have any questions about your unique situation. While we have tried to ensure the accuracy of the information in this article, we accept no liability for errors or omissions.