The Underused Housing Tax

Investors:

There are significant changes related to the Underused Housing Tax (UHT)

that became effective on January 1st, 2022.

UHT Overview:

UHT is primarily a tax targeting vacant or underused properties not owned by Canadian citizens or permanent residents. However, many Canadian entities, including individuals, corporations, partnerships, and trustees with ownership of residential real estate, must also consider this tax. Beginning in 2022, if you manage properties within Canada, you must determine whether a UHT return is required. The tax is calculated at 1% of the residential property's value, considering the higher of its last sale price or property tax assessment value.

Who Should File a UHT Return?

If you manage properties under the following conditions, a UHT return is needed:
- Partnerships with Canadian properties with residential structures, such as farm or rental properties.

- Trusts with Canadian properties that have residential structures.

- Corporations owning any residential property in Canada.

- Properties owned by non-Canadian citizens or non-permanent residents.

Who Doesn't Need to File a UHT Return?

Exemptions include:

- Those without a residential property as of December 31st, 2022.

- Canadian citizens or permanent residents personally owning properties.

- Public Canadian entities, charities, and certain trusts.

Residential Properties under UHT Scope:

Properties the UHT affects include detached homes, duplexes, triplexes, semi-detached homes, townhouses, and condominiums. It excludes buildings with four or more separate units, mobile homes, and certain trailers.

Penalties for Non-Compliance:

You might not owe tax, but not filing a UHT return can lead to steep penalties.

Deadlines:

The CRA wants the UHT filed by October 31st, 2023. In the future, deadlines will likely be April 30th of each year.

For more information - contact your accountant to find out if the UHT return is needed. For more information on buying and/or selling real estate, contact us! We’d love to help.

Source: https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html