Underused Housing Tax

The Government of Canada has created a new tax designed to address underused housing.  There are penalties for not filing so ignorance of the law is no excuse.  

“The Underused Housing Tax is an annual federal 1% tax on the ownership of vacant or underused housing in Canada that took effect on January 1, 2022.

The tax generally applies to foreign national owners of housing in Canada (Which includes cottage properties). However, in some situations, this tax also applies to some Canadian owners (such as certain partners, trustees, and corporations).”

To understand if you need to complete and file the return a cottager should review the following information.

What is the UHT?

The UHT, which took effect on January 1, 2022, is a tax on the ownership of vacant or underused residential properties that are situated in Canada.

Starting with the 2022 calendar year and for each following calendar year, owners of residential properties that are situated in Canada have to determine if they have to file UHT returns and pay the UHT on their residential properties.

Who has to file a UHT return?

Persons who, on December 31 of a calendar year, are affected owners of residential properties that are situated in Canada have to file a UHT return for each residential property, situated in Canada, that they own.

Persons who, on December 31 of a calendar year, are excluded owners of residential properties that are situated in Canada do not have to file UHT returns.

Excluded owner

You are an excluded owner of a residential property if, on December 31 of a calendar year, you are any of the following:

• the government of Canada or a province, or an agent of the government of Canada or a province

• an owner of a residential property as a trustee of any of the following trusts:

• a mutual fund trust for Canadian income tax purposes
• a real estate investment trust (REIT) for Canadian income tax purposes
• a specified investment flow-through trust (SIFT) for Canadian income tax purposes

• an individual who is a Canadian citizen or permanent resident of Canada, unless the individual is an owner of the residential property as:

• 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)
• a partner of a partnership

• 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, hospital authority, municipality, para-municipal organization, public college, school authority, or university for GST/HST purposes

• an Indigenous governing body or a corporation wholly owned by an Indigenous governing body

If you are  an “Affected” owner (not an “Excluded” owner) please look for more information from Revenue Canada which is available on their website. (https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html)