The Underused Housing Tax Act was passed in 2022. It’s the first federal statute designed to discourage foreign ownership of vacant Canadian real estate properties.

The Act imposes an annual tax of 1% on the value of residential property located in Canada owned, directly or indirectly, by persons who are neither citizens nor permanent residents of Canada, unless the owner is eligible to claim a specific exemption.

The due date to file the 2022 UHT return to remit any taxes payable is May 1, 2023.

Who the tax applies to

The tax usually applies to non-resident, non-Canadian owners, both individuals and corporations. In some situations, however, it also applies to Canadian owners.

Who is excluded

If you are an excluded owner of a residential property in Canada, you have no obligations or liabilities under the Underused Housing Tax Act.

An excluded owner includes, but is not limited to:

  • An individual who is a Canadian citizen or permanent resident – unless on the list of affected owners posted in the next section, “Who is not excluded”
  • Any person – including an individual who is a Canadian citizen or permanent resident – who owns a residential property as a trustee of a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT) for Canadian income tax purposes
  • A Canadian corporation whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
  • A registered charity for Canadian income tax purposes
  • A cooperative housing corporation for Canadian GST/HST purposes
  • An Indigenous governing body or a corporation wholly owned by an Indigenous governing body.

Note: Even if you’re an excluded owner, you still must file to prove that you are excluded. See the next section for details.

Filing Requirements

Owners have to file a UHT-2900 Underused Housing Tax Return and Election Form for each property in Canada for which all the following conditions are met on December 31 of a calendar year:

  • The property is a residential property
  • They are an owner of the residential property
  • They are not an excluded owner of the residential property

Who is not excluded

If you are not an excluded owner, the Canadian government refers to you as an “affected owner”, and you have obligations under the Underused Housing Tax Act for your residential property in Canada. An affected owner includes, but is not limited to:
An individual who is not a Canadian citizen or permanent resident

  • An individual who is a Canadian citizen or permanent resident and who owns a residential property as a trustee of a trust (other than as a personal representative of a deceased individual)
  • Any person – including an individual who is a Canadian citizen or permanent resident – who owns a residential property as a partner of a partnership
  • A corporation that is incorporated outside Canada
  • A Canadian corporation whose shares are not listed on a Canadian stock exchange designated for Canadian income tax purposes
  • A Canadian corporation without share capital

What to do if you’re an affected owner

If you are an affected owner, you must file an Underused Housing Tax return for each residential property that you own in Canada on December 31.

You must also pay the Underused Housing Tax, unless your ownership qualifies for an exemption for the calendar year. Even if your ownership qualifies for an exemption, you must still file an Underused Housing Tax return for the calendar year.
Contact us for more information and filing assistance

At HNPC, our Real Estate Law Services team, in conjunction with your accountant, can provide you with more details, including:

  • Penalties for failing to file the return on time
  • Exemptions
  • Special ruling for individual owners of multiple residential properties

And we’re here to assist you with every aspect of filing the 2022 UHT return and remitting taxes payable by the due date of May 1, 2023.

Toronto Real Estate Lawyer and Professional Services

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