March 14, 2023
Underused Housing Tax
The Government of Canada implemented the Underused Housing Tax (UHT) on June 9, 2022, which impacts certain residential property owners as of December 31, 2022.
A residential property owner who is an affected owner must file the UHT return by April 30 of the following year. Affected owners may be required to pay an annual 1% tax on the taxable value or the fair market value (FMV) of the vacant or underused housing.
Who is an affected owner?
An affected owner includes:
• An individual who is not a Canadian citizen or permanent resident
• A Canadian corporation whose shares are not listed on a Canadian stock exchange (i.e. CCPCs and other private corporations)
• An individual who owns a residential property as a trustee of a trust
• Any person who owns a residential property as a partner of a partnership
• A Canadian corporation without share capital, or
• A corporation that is incorporated outside Canada
If you meet any of these factors please feel free to reach out to us at Sabo, Jang & Co Ltd. to provide you with assistance as to how to proceed.
A residential property owner who is an excluded owner is not required to file a UHT return or pay the annual tax.
Who is an excluded owner?
An excluded owner includes, but is not limited to:
• A Canadian citizen or permanent resident
• Any person who owns 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
• A registered charity
• A cooperative housing corporation, or
• An Indigenous governing body or a corporation wholly owned by an Indigenous governing body
To file a return, you will need a social insurance number, individual tax number, or a Canadian business number. If you are a corporation, you must use a business number with an Underused Housing Tax (RU) program account identifier code to file your UHT Return.
Penalties
Penalties for failing to file the UHT Return when it is due is a minimum of:
• $5,000 for individuals
• $10,000 for corporations
An affected owner could be subject to UHT on an exempt property if the UHT return is not completed.
Conclusion
If you are an excluded owner, no action is required on your part. Anyone else who owns residential property may want to consider discussing your situation with us at Sabo, Jang & Co. Ltd. to get a more complete understanding of how this new tax and reporting requirement may affect you.
