Tax Update: The Underused Housing Tax (UHT)
Updated: December 28, 2023
The landscape of the Underused Housing Tax (UHT) in Canada has seen notable shifts, warranting a closer look at recent updates and proposed changes. Originally introduced in the 2021 Federal Budget, the UHT targets vacant or underused housing owned by non-residents, with implications ranging from filing requirements to substantial late-filing penalties.
In a bid to keep taxpayers informed, this article provides a condensed overview of key developments in recent months.
What is the Underused Housing Tax?
The UHT was intended to target vacant or underused residential real estate owned, directly or indirectly, by foreign nations who are neither Canadian citizens nor permanent residents. The UHT is equal to 1% of the value of the residential property.
When is the UHT Return Due:
Registered owners of residential real estate in Canada as of December 31, excluding “excluded owners”, will be required to file an annual return for each residential real estate property by April 30 of the following year.
What is a Residential Property?
Residential property is defined as property that is either of the following:
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A detached house or similar building containing no more than 3 dwelling units, along with any appurtenances and the related land
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A semi-detached house, rowhouse unit, residential condominium unit or other similar premises,
along with any common areas, appurtenances, and the related land
Examples of residential properties include:
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Detached houses
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Duplexes/triplexes
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Laneway/coach houses
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Cottages/cabins/chalets (not for commercial use)
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Semi-detached houses
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Residential condominium units
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Rowhouse units/townhouse
Examples of Exempt Residential Properties
Residential property may be exempt from UHT if the property is any of the following:
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Used as primary place of residence or for qualifying occupancy
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Vacation property
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Not suitable for year-round use
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Seasonally inaccessible
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Uninhabitable during the calendar year
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Newly constructed
Examples of Non-Residential Properties
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Quadruplexes (buildings that have 4 dwelling units
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High-rise apartment buildings
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Buildings that are primarily for retail or office use and that contain an apartment
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Commercial cottages, cabins and chalets
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Commercial condominium units
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Boarding houses and lodging houses
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Hotels, motels, inns, and bed and breakfasts
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Floating homes
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Mobile homes
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Park model trailers
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Travel trailers, motor homes and camping trailers
Excluded Owners
Excluded owners are exempt from filing a UHT Return or pay the UHT as follows:
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An individual who is a citizen or permanent resident of Canada, unless you are an owner of the residential property as either as a trustee of a trust or a partner in a partnership;
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Publicly traded Canadian corporations;
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Registered charity;
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Cooperative housing corporations;
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Municipal organization and other public institutions and government bodies and
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An Indigenous governing body or corporation wholly owned by such a body.
How is the UHT Calculated
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The UHST is calculated based on a straightforward formula: 1% of the property value multiplied by the owner’s ownership percentage.
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The value of residential property can be determined using one of the following 2 methods
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Taxable Value:
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The greater of:
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The assessed tax value for the year under the related property tax assessment or the most recent sale price on or before December 31 of the calendar year
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Fair Market Value:
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Fair market value can only be used if the owner files an election to use this method for the property (the election is included on Form UHT-2900). Owner must obtain an appraisal of the property by an accredited, arm’s length real estate appraiser.
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How to File the UHT Return
Individuals, who on December 31 of a calendar year, are affected owners of residential properties that are situated in Canada, will need to complete a UHT-2900 (Underused Housing Tax Return and Election Form). This form will primarily require them to complete basic information about themselves, disclose information about the property that will come from their property tax assessment.
Examples include:
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Property address
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Property ID in land registry
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Type of residential property
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Year required
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Ownership type
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Names of other owners on title and percentage of ownership
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Most recent assessed value
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Most recent sale price
Penalties for failing to file an UHT
If you fail to file your return for a residential property for the 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:
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$5,000 for the affected owners who are individuals or $10,000 for affected owners that are not individuals (such as corporations)
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the amount that is the total of the following:
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5% of your underused housing tax payable for the residential property for the calendar year
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3 % of your underused housing tax payable for the residential property for the calendar year multiplied by the number of complete calendar months that the return is past due
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Recent announcement by Canada Revenue Agency (CRA) on October 31, 2023, the application of penalties and interest for the 2022 calendar year will be waived for any late filed UHT return, provided that the return is filed and the UHT is paid by April 30, 2024.
Furthermore, as part of the 2023 Fall economic Statement, there is a proposal to reduce the minimum late filing penalty. If enacted, the new amounts would be $1,000 for individuals (down from $5,000) and $2,000 for corporations (down from $10,000).
For more information please refer to the government website. Underused Housing Tax
Disclaimer:
The information contained herein is general in nature and is based on proposals that are subject to change. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. If you are looking for Tax Services, Platinum Tax & Accounting provides personalized support about your unique situation.