15 Feb Underused Housing Tax

The Government of Canada implemented the Underused Housing Tax (UHT) on June 9, 2022 and this will impact certain residential property owners as of December 31, 2022.

A residential property owner who is not classified as an “Excluded Owner” must file the UHT return by April 30 of the following year. They may be required to pay an annual 1% tax on the Taxable Value or the Fair Market Value of the vacant or underused housing.

Excluded Owners include Canadian citizens and permanent residents, so most individuals will not need to file a UHT return. However, all private corporations, partnerships and trusts (even those owned by Canadian citizens) who own residential property will be required to file a UHT return annually, even if they are exempt from the UHT.

Failure to file a UHT return has significant penalties, starting at $5,000 for individuals and $10,000 for corporations. Further, failure to file could lead to the UHT being payable, even if an exemption should have applied.

These rules are complex, but we’ve broken down the key points here.

If you are a Canadian citizen or permanent resident (except in capacity as a partner or trustee), no action is required on your part. Anyone else that owns residential property, including individuals that own the property as a partner or trustee, may want to consider discussing your situation with your Clearline tax advisor.