The 2021 federal budget introduced the underused housing tax which is basically a 1% tax on the value of non-resident, non-Canadian-owned real estate that is considered to be vacant or underused.
This tax was generally aimed at non-residents of Canada, however, there are situations where these rules can also apply to Canadian citizens or Canadian residents. Canadians may not be required to pay the tax but will have to file a return and claim the exemption. Note: there is a separate return that would normally be due on April 30th of every year. For the 2022 calendar year, CRA has extended the deadline to October 31st, 2023.
Please note, there are significant penalties for not filing these returns starting at $5,000 for individuals and $10,000 for corporations, per return, even if there are no taxes payable.
The framework of the UHD basically falls into three broad groups:
- Excluded owners-owners with no reporting or tax obligation.
- Who are excluded owners?
- Individuals, that are Canadian citizens or permanent residents.
- Public corporations
- Charitable organizations
- Who are excluded owners?
- Affected owners:
- Owners that are required to file the UHT return and pay tax.
- Residential properties in Canada owned either directly or indirectly: wholly or partly by non-residents and non-Canadians.
- Owners that are required to file the UHT return but with no tax payable.
- Specified partnerships -CRA looks at several issues such as ownership on title and whether partnerships exists based on fact.
- Specified Canadian private corporations.
- Estates and trusts
- Owners that are required to file the UHT return and pay tax.
This is a very basic overview of the UHT tax. Each circumstance must be evaluated considering the current legislation and the commentaries from CRA.
You must consider whether you are an affected person, who needs to file a return. ENT CPAs are here to help you, so please contact us if UHT may apply to you.