Owning a property in Canada comes with responsibilities, and there’s something that many homeowners are not aware of: the Underused Home/Housing Tax, or UHT.
Effective from January 1, 2022, the Government of Canada introduced the Underused Home/Housing Tax, which targets vacant or underused properties in Canada to optimize housing supply. While it mainly affects non-resident, non-Canadian owners, Canadian homeowners might also be subject to this tax in certain situations.
Now, let’s understand who needs to file a UHT return. If you’re not an “excluded owner,” you must file an annual UHT return for each residential property you owned as of December 31 of the previous year. Excluded owners include Canadian citizens, permanent residents, publicly traded Canadian corporations, and specific entities like registered charities, universities, hospitals, and Indigenous governing bodies. Attention: PRIVATE companies are NOT excluded owners. So if you own a property under a Canadian corporation that is not publicly traded, you might be required to file.
Exemptions from paying UHT may apply depending on various factors. If your property is your primary residence or occupied for a certain period, you might be exempt.
The UHT is calculated at a rate of 1% on the “taxable value” of the property. This value can be based on the highest between a government assessment and the recent sale price, or the fair market value of the property supported by an appraisal.
Although you might not have to pay for UHT you might still be required to file. So It’s essential to file your UHT return by April 30th every year. This year CRA extended the Underused Housing Tax Deadline to October 31, 2023. Failure to do so can result in penalties, starting at $5,000 for individuals and $10,000 for corporations, with additional monthly penalties. We’d recommend that you speak to your accountant to see what’s applicable to you since you are still on time to file if this is the case.
Make sure you’re informed and fulfill your obligations to ensure a smooth homeowner experience. For more information visit this link from the Government of Canada AND consult with your CPA for further clarification.