The Underused Housing Tax is an annual 1% tax on the ownership of vacant or underused housing in Canada that took effect on January 1, 2022.
The tax usually applies to non-resident, non-Canadian owners. In some situations, however, it also applies to Canadian owners.
Many Canadian corporations, partnerships, and trusts — including those with no foreign ownership or foreign beneficiaries — that hold residential property are required to file a return for each property annually even where no tax is payable. Significant penalties apply if the UHT return is not filed on time. Affected owners who are individuals are subject to a minimum penalty of $5,000. Affected owners that are corporations are subject to a minimum penalty of $10,000.
Every person that is, on December 31, an owner (other than an excluded owner) of a residential property in Canada is required to file an annual return for the calendar year and pay a one percent tax on that property for the year. This federal tax is levied in addition to similar vacancy taxes already administered by certain provinces and municipalities.
The return must be filed, and any tax remitted, by April 30 following the calendar year.
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 included in the list of affected owners below
- any person – including an individual who is a Canadian citizen or permanent resident – that 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
If you are not an excluded owner we refer 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 – that 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 (i.e. residential property held by Canadian Private Corporation)
- a Canadian corporation without share capital
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.
Certain characteristics or eligible uses will exempt a residential property from the UHT.
Exemptions based on the type of owner
Your ownership of a residential property may be exempt for a calendar year if you are:
- a specified Canadian corporation i.e. less than 10% shares are held by non-resident