Real Estate Law Blog

Underused Housing Tax Filing Obligations

The filing deadline for the first year of the Federal Underused Housing Tax (“UHT”)^[1] is fast approaching. Any owner of residential property in Canada who is not explicitly defined as an “excluded owner” must file a return by April 30, 2023 for each residential property of the owner. The UHT is a 1% tax on the value of vacant or underused residential property directly or indirectly owned by non-permanent residents or non-Canadians. Just because you don’t have any tax to pay, does not mean you don’t have a filing obligation.

Any owner of residential property in Canada must file a UHT return for each residential property that they own at the end of the calendar year unless they are an “excluded owner” as defined under the Federal Underused Housing Tax Act (the “Act”).

Under the Act, “excluded owners” include:

• Canadian citizens and permanent residents that own residential property in Canada other than in their capacity as a trustee of a trust or partner of a partnership;
• Canadian corporations whose shares are listed on a designated stock exchange;
• Registered charities;
• Cooperative housing corporations; and
• Indigenous governing bodies or corporations wholly owned by such bodies.

UHT Exemptions and Specified Canadian Corporations

A non-excluded owner must file a UHT return, but may not be liable to pay tax if they qualify for an exemption. Exemptions under the Act are based on the occupant, owner, and the availability, location and use of the residential property.

Canadian corporations whose shares are not listed on a Canadian stock exchange are not considered an “excluded” owner under the Act and therefore will typically need to file a return. However, a Canadian corporation will be exempt be from paying the UHT for residential properties they own if they are a “Specified Canadian Corporation.”

Under the Act, a specified Canadian corporation is a corporation incorporated in Canada whose shares are not listed on a Canadian stock exchange, where the controlling persons (those who own 10% or more of the total equity or voting shares, directly or indirectly) are citizens or permanent residents, and corporations incorporated in Canada. The requirements differ somewhat for corporations without share capital, such as incorporated societies.

Penalties and Offenses

Penalties set out in the Act are broad in applicability. There are a number of penalties for failing to file a return, regardless of whether a person owes any amount of UHT. Penalties also apply to every person that fails to provide information required under the Act.

A person who fails to file a return is liable to a penalty equal to $5,000 for an individual or $10,000 for a corporation, plus 5% of the tax calculated, and 3% of the product of the tax calculated multiplied by the number of complete months from the date on which the return was required to be filed. Further, every person who fails to provide information required under the Act, such as information required in a UHT return, is also liable to a penalty of $250 for every such failure.

In addition to being liable for a penalty for failing to file, a person may also be liable on summary conviction to a fine of between $2,000 and $40,000 or to a term of imprisonment not exceeding 12 months, or to both. An individual who intentionally fails to pay the UHT is guilty of an offence and is liable to additional fines.

Additional Information

For more information on the UHT and other similar taxes, please see our previous posts by Gareth Williams and Ben Westerterp: Underused and Undepreciated: Taxing Underused Foreign-Owned Residential Property Nationwide and Empty Homes and Mixed Incentives: Canada’s New Underused Housing Tax.

If you have any questions about the UHT and how it may apply to you, please contact a member of our Tax Group or Real Estate Group.

_{[1] The Federal Underused Housing Tax Act came into force effective on January 1, 2022 and implements the UHT.}