Who must file a return and pay the tax

 

Not Required To File – Excluded Owner

If you are an excluded owner of a residential property in Canada, you have no obligations or liabilities under the Underused Housing Tax Act.

An excluded owner includes, but is not limited to:

• an individual who is a Canadian citizen or permanent resident unless included in the list of affected owners as noted following.
• any person, including an individual who is a Canadian citizen or permanent resident that owns a residential property as a trustee of a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT) for Canadian income tax purposes.
• 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 for Canadian GST/HST purposes.
• an Indigenous governing body or a corporation wholly owned by an Indigenous governing body.

Required To File A Return – Affected Owner

If you are not an excluded owner, you are referred to as an affected owner and you have obligations under the Underused Housing Tax Act for your residential property in Canada. An affected owner includes, but is not limited to:

• an individual who is not a Canadian citizen or permanent resident.
• 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).
• any person – including an individual who is a Canadian citizen or permanent resident – that owns a residential property as a partner of a partnership
• a corporation that is incorporated outside Canada.
• a Canadian corporation whose shares are not listed on a Canadian stock exchange designated for Canadian income tax purposes.
• a Canadian corporation without share capital.

If you are an affected owner, you must file an Underused Housing Tax return for each residential property that you own in Canada on December 31by April 30^th of the following year. You must also pay the Underused Housing Tax, unless your ownership qualifies for an exemption for the calendar year.

Even if your ownership qualifies for an exemption, you must still file an Underused Housing Tax return for the calendar year.

Penalties for failing to file a return on time

 

There are significant penalties if you fail to file an Underused Housing Tax return when it is due. 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.

 

Exemption from Underused Housing Tax (UHT)

 

Type of ownership

 

Your ownership of a residential property may be exempt for a calendar year if you are:

• a specified Canadian corporation.
• a partner of a specified Canadian partnership, or a trustee of a specified Canadian trust.
• a new owner in the calendar year.
• a deceased owner, or a co-owner or personal representative of a deceased owner.

Availability of residential property

Your ownership of a residential property may be exempt for a calendar year if the property is:

• newly constructed
• not suitable to be lived in year-round, or seasonally inaccessible
• uninhabitable for a certain number of days because of
  • a disaster or hazardous conditions
  • renovations

Exemption based on the location and use of the residential property

Your ownership of a residential property may be exempt for a calendar year if the property is:

• 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

Refer to the Underused housing tax vacation property designation tool to determine if your residential property is located in an eligible area of Canada for the purposes of this exemption.  Below is the website.

https://apps.cra-arc.gc.ca/ebci/sres/ext/pub/ntrUhtExpnTl?request_locale=en_CA

 

Exemptions based on the occupant of the residential property

 

Your ownership of a residential property may be exempt for a calendar year in either of the following situations:

• 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
• at least 180 days in the calendar year are included in one or more qualifying occupancy periods for your ownership of the residential property

A qualifying occupancy period is at least one month in a calendar year during which one of the following qualifying occupants has continuous occupancy of the residential property:

• an individual with a written contract who deals at arm’s length with you and your spouse or common-law partner
• an individual with a written contract who does not deal at arm’s length with you or your spouse or common-law partner, and who pays at least fair rent for the property.
• you, or your spouse or common-law partner, who has a Canadian work permit.
• your spouse or common-law partner, parent, or child who is a Canadian citizen or permanent resident.

Special Rule for Individual For Owners of Multiple Residential Properties.

 

• If between you and your spouse or common-law partner you own multiple residential properties, your ownership may not qualify for the exemptions for either primary place of residence or qualifying occupancy unless you file an election with the CRA to designate only one property for the purposes of the exemption.

Calculate What You Owe

• If your ownership of a residential property does not qualify for an exemption from the Underused Housing Tax for a calendar year, you must calculate what you owe for the calendar year.
• The tax rate of the Underused Housing Tax is 1%. To calculate what you owe, multiply the value of the residential property by the 1% tax rate. Then multiply that result by your ownership percentage of the property.

Determine the Value of The Property

• There are two ways to determine the value of a residential property. The general rule is to use its taxable value. If you want to use its fair market value instead, you must file an election with the Agency.
• An affected owner electing to use the fair market value of a residential property to calculate Underused Housing Tax owing must get an appraisal of the property. The appraisal report must be prepared by an accredited, professional real estate appraiser operating at arm’s length from the owner. The intended use of the appraisal report must be to assist in the administration of the Underused Housing Tax Act.

Filing the Return

• If you are an affected owner of a residential property in Canada on December 31, you must file an Underused Housing Tax return for the calendar year. Even if your ownership of the property qualifies for an exemption and you do not owe any tax, you still must file a return.

 

When to file the return or an election

• You must file your return for a calendar year by April 30of the following calendar year.
• You must pay any Underused Housing Tax you owe for a calendar year by April 30of the following calendar year.
• Elections to use the fair market value to calculate the tax you owe, or to qualify for the exemptions for primary place of residence or qualifying occupancy, are due by April 30and are filed on the return.
• There are significant penalties if you fail to file an Underused Housing Tax return return when it is due.

 

Getting Tax Identifier Numbers – Mandatory

You must have a valid CRA tax identifier number to file your Underused Housing Tax return. The following tax identifier numbers may be used depending on the situation:

• a social insurance number (SIN)
• an individual tax number (ITN)
• a Canadian business number (BN) with an Underused Housing Tax (RU) program account identifier code.

• A trust account number (TAN) cannot be used to file Underused Housing Tax returns.

 

Tax identifier numbers for individuals

 

• Depending on your citizenship, if you are an individual, you must file your Underused Housing Tax returnusing either a SIN or an ITN.
• If you are an individual who is a Canadian citizen or permanent resident, you must use a SINto file your return.
• If you do not already have a SIN, please contact Service Canadafor information on how to apply for one.
• If you are an individual who is not a Canadian citizen or permanent resident, and you already have a SIN, you must use your SIN to file your return.
• If you do not have a SIN, you must use an ITNto file your return. If you do not have an ITN, you must apply for one.
• Application for a CRA individual tax number (ITN) for non-residents (Form T1261)

 

Tax identifier numbers for corporations

• If you are a corporation, you must use a business number (BN) with an Underused Housing Tax (RU) program account identifier code to file your Underused Housing Tax return.
• If you already have a BN, you will have to register your RU program account before you can file your return.
• If you do not have a BN, you must apply for one andregister your RU program account before you can file your return.
• You will be able to register your RU program account online after February 6, 2023through the following link:

www.canada.ca/en/revenue-agency/services/tax/businesses/topics/registering-your-business/register.html

 

Multiple residential properties

If you are an affected owner who owns two or more residential properties in Canada on December 31, you must file a separate Underused Housing Tax return for each property.

 

Multiple owners

If you are an affected owner of a residential property in Canada on December 31 who shares ownership with one or more co-owners who are also affected owners, each of you must file separate Underused Housing Tax returns for the property. You must each file separate returns even if your respective ownership qualifies for an exemption.

Keeping records

If you are an affected owner of a residential property in Canada on December 31, you must file an Underused Housing Tax return for the residential property. You must also keep records to support the determination of your obligations and liabilities. Even if your ownership is exempt and you do not have to pay the tax, you must still keep records. If you claim an exemption but do not have adequate records to support that exemption, it may be disallowed.

 

The Underused Housing Tax Return form is    uht-2900-22e

It can be found online at CRA

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/uht-2900.html

 

__________________________________________________________________

 

Information is current to February 7, 2023.  The information contained in this bulletin is of a general nature and is not intended to address the circumstances of any particular individual or entity.  Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.  No one should act upon such information without appropriate professional advice after a through examination of the particular situation.

 

If you have questions please reach out and contact us