Good Afternoon,
As outlined in our Spring Newsletter, there is an additional tax filing requirement for this tax season. It’s a filing requirement that applies to corporations, partnerships and trusts who own residential properties as at December 31, 2022. The filing requirement also applies if you are an individual who is not a citizen or permanent resident (i.e., non residents, temporary residents etc.) who own residential properties as at December 31, 2022.
The Underused Housing Tax (UHT) is an annual 1% tax on vacant or underused residential housing in Canada that came into effect on January 1, 2022. Here is outline of the tax and filing requirements for those affected:
1. The UHT impacts private corporations, trusts, partnerships, and non-residents/citizens who own residential properties in Canada. Under the UHT rules, a ‘residential property’ generally includes:
a. detached houses (or similar buildings) with no more than three units. This includes cottages, cabins, and chalets unless they are considered commercial property.
b. semi-detached houses, row houses, condominium units, and similar separate or divided premises such as a coach house or laneway house
2. Excluded owners have no obligations or liabilities under the UHT. These include:
a. individual Canadian citizens or permanent residents holding property in their own name.
b. individuals who own a residential property through a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT)
c. publicly traded Canadian corporations
d. registered charities
e. cooperative housing corporations
3. Affected owners include privately held Canadian corporations, partnerships, trusts and trustees (except those specifically excluded above), non-profit corporations, and individuals who are not Canadian citizens or permanent residents.
4. If you are an affected owner, you must file an annual Underused Housing Tax return by April 30 for each residential property owned in Canada on December 31 of the previous year (beginning December 2022). The underused housing tax is also applicable unless your ownership qualifies for an exemption for the calendar year. The amount of UHT equal to 1% of the taxable value of your ownership percentage of the property by April 30.
5. Exemptions can be based on type of owner, availability of the residential property, location and use of the residential property, or the occupant of the residential property. Even if an affected owner meets an exception and is not required to pay the UHT, they still must file a return to declare the exemption.
6. There are significant penalties if you are an affected owner and fail to file a UHT return by its due date. 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.
7. Further information is available at https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html
As this is a new filing requirement, there are still many questions that CRA is addressing. However, if you are an affected owner as outlined above, please contact us and we can assist you in the filing of the Underused Housing Tax return.
Note the following additional information:
- the Deadline to file is April 30th, 2023.
- For those affected owners who will be sending your tax documents, please send the following property documents as well:
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- Purchase and sale agreement
- Fair Market Value of property on Dec 31, 2022
- Most recent assessed value of the property (from the municipal property assessment corporation (MPAC)
- We must file a UHT return for each property owned for affected users.
- We will calculate the UHT based on the information provided.
As this is a new filing requirement, please send us the information to us before April 15th to avoid delays in filing.
Contact us if you have any questions.
Best regards,
Ali Raza Jaffer, CPA, CGA, MBA, BComm
President, AR Jaffer Professional Corporation
Chartered Professional Accountant
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