May 26, 2023
The implementation of the Underused Housing Tax (UHT) by the Canadian government on January 1, 2022, has brought a new tax obligation for certain homeowners. The Underused Housing Tax targets vacant or underused residential properties and impacts non-residents, non-Canadian owners, and Canadian residents. In this blog post, we will delve into the details of the Underused Housing Tax, explaining its purpose, calculation, filing requirements, exemptions, and potential penalties. While we are real estate lawyers and not accountants, we aim to provide valuable information to help you navigate this tax requirement. For personalized advice on the tax implications, we recommend consulting with an accounting or tax professional.
The Underused Housing Tax (UHT) is an annual tax introduced by the Canadian government to address the issue of vacant or underused residential properties. It applies a tax rate of 1% to the market value of eligible residential properties for the 2022 calendar year. The Underused Housing Tax primarily targets non-resident non-Canadian owners, but Canadian residents may also be affected by its provisions.
Homeowners may be required to file an Underused Housing Tax return, even if no tax is owed. The deadline for submitting the return is April 30, 2023. To determine if you need to file a return, certain conditions must be met. Firstly, you must be the legal owner of a Canadian residential property. Secondly, you should not fall under the category of an “excluded owner” as defined by the Underused Housing Tax regulations.
Excluded owners are individuals or entities exempt from filing an Underused Housing Tax return. They include Canadian citizens or permanent residents (unless specifically listed as affected owners), certain corporations listed on Canadian stock exchanges, registered charities, cooperative housing corporations, and Indigenous governing bodies or their wholly owned corporations.
On the other hand, affected owners are individuals or entities that may be required to file an Underused Housing Tax return. They encompass Canadian citizens or corporations holding residential properties through partnerships or trusts (excluding testamentary trusts). It also includes Canadian private corporations, non-Canadian corporations, non-residents of Canada owning residential properties, co-owners of residential properties, and owners of farmland with residential properties.
Exemptions from the Underused Housing Tax depend on various factors, such as the type of owner, availability, location, use, and occupants of the residential property. It is essential to carefully review the UHT regulations to determine if you qualify for any exemptions. Failure to file the Underused Housing Tax return by the deadline may result in penalties starting at $5,000 for individuals and $10,000 for corporations.
Navigating the Underused Housing Tax (UHT) is crucial for Canadian homeowners affected by this new tax obligation. Understanding the requirements, filing obligations, exemptions, and potential penalties associated with the Underused Housing Tax can help homeowners fulfill their tax responsibilities with confidence. While we provide information on the Underused Housing Tax as real estate lawyers, it is important to consult with accounting or tax professionals for personalized advice. At Passgo Real Estate Law, we are here to assist you with real estate transactions, including conveyancing for buying or selling a home. Contact us today to get started or for any questions you may have.
Hi! I’m Erin Crocker. I’m a real estate lawyer with over 10 years of experience in Alberta and British Columbia real estate law. I love technology and efficiency. I’m on a mission to create a modern, digital closing experience for buyers and sellers through technology, transparency and sharing knowledge.
