UHT Publication Overview Q&A

Government of Canada has enacted Underused Housing Tax Act (UHTA) for residential properties. This legislation provides a 1% annual tax on the value of vacant or underused Canadian residential property held by both non-Canadian owners and certain Canadian owners. Some owners will be considered an “excluded owner,” but non-excluded Canadian owners will have filing obligation, including privately held corporations, even in the situations when the Underuse Housing Tax (UHT) is not payable. The 2022 calendar year UHT information return in respect of their property is due by October 31, 2023, or face minimum penalties of $5,000 for individuals or $10,000 for corporations, regardless of any tax liability.

Following are some frequently asked questions regarding this topic:

1. What is the federal Underused Housing Tax Act (“UHTA”)?
   
   1. A 1% annual tax on the value of vacant or underused Canadian residential property held by non-Canadian owners and certain Canadian owners. Unless the owner is an “excluded owner,” various Canadian owners will have a filing obligation, including corporations that are not publicly traded and certain trustees and partners – even in situations when the Underuse Housing Tax (“UHT”) is not payable. The 2022 calendar year UHT information return in respect of their property is due by October 31, 2023, or face minimum penalties of $5,000 for individuals or $10,000 for corporations – even if no tax is payable.
      
2. Who is an excluded owner?
   
   1. the government of Canada or a province, or an agent of the government of Canada or a province;
      
   2. an owner of a residential property as a trustee of any of the following trusts:
      
      1. a mutual fund trust for Canadian income tax purposes
         
      2. a real estate investment trust (REIT) for Canadian income tax purposes
         
      3. a specified investment flow-through trust (SIFT) for Canadian income tax purposes;
         
   3. an individual who is a Canadian citizen or permanent resident of Canada, unless the individual is an owner of the residential property as:
      
      1. a trustee of a trust (except if the individual is the personal representative of a deceased individual, in which case the individual is an excluded owner);
         
      2. a partner of a partnership;
         
   4. a Canadian corporation whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes;
      
   5. a registered charity for Canadian income tax purposes;
      
   6. a cooperative housing corporation, hospital authority, municipality, paramunicipal organization, public college, school authority, or university for GST/HST purposes;
      
   7. an Indigenous governing body or a corporation wholly owned by an Indigenous governing body.
      
3. Who may be an affected owner?
   
   1. an individual who is not a Canadian citizen or permanent resident
      
   2. 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 and other than as a trustee of a mutual fund trust, real estate investment trust or SIFT trust for Canadian income tax purposes);
      
   3. any person - including an individual who is a Canadian citizen or permanent resident - that owns a residential property as a partner of a partnership;
      
   4. a corporation that is incorporated outside Canada;
      
   5. a Canadian corporation whose shares are not listed on a Canadian stock exchange designated for Canadian income tax purposes;
      
   6. a Canadian corporation without share capital.
      
4. What is a Residential property?
   
   1. Generally, for purposes of UHT, residential property is property situated in Canada that is either of the following:
      
      1. a detached house or similar building that contains not more than three dwelling units, along with any appurtenances and the related land;
         
      2. a semi-detached house, rowhouse unit, residential condominium unit, or other similar premises, along with any common areas or appurtenances and;
         
      3. the related land;
         
      4. Related land refers to the land that is subjacent or immediately contiguous to a residential building and that is reasonably necessary for its use and enjoyment as a place of residence for individuals.
         
5. When is an affected owner exempt from paying UHT in respect of a property for a year based on ownership?
   
   1. on December 31:
      
      1. a specified Canadian corporation;
         
      2. a partner of a specified Canadian partnership, or a trustee of a specified Canadian trust;
         
      3. a new owner in the calendar year;
         
      4. a deceased owner, or a co-owner or personal representative of a deceased owner.
         
6. When is an affected owner exempt from paying UHT in respect of a property based on the property?
   
   1. An affected owner can be exempt from paying UHT in respect of a property for a year, if:
      
      1. newly constructed;
         
      2. not suitable to be lived in year-round, or seasonally inaccessible;
         
      3. uninhabitable for a certain number of days because of:
         
         1. a disaster or hazardous conditions
            
         2. renovations
            
      4. a vacation property located in an eligible area of Canada and used by you or your spouse or common-law partner for at least 28 days in the calendar year;
         
      5. it is the primary place of residence for you or your spouse or common-law partner, or for your child who is attending a designated learning institution;
         
      6. at least 180 days in the calendar year are included in one or more qualifying occupancy periods for your ownership of the residential property.
         

This overview aims to provide guidance and clarity to questions from UHT publication. Moving forward, it is important to stay up to date with current and new regulations to avoid penalties.

If you have any additional questions or require further assistance, please do not hesitate to reach out to our tax planning team for help in determining whether you are required to address this filling, and/or completing the filing itself.