Newly Introduced for 2022 – Underused Housing Tax (UHT)
What You Need to Know
Effective on January 1, 2022, the federal government has introduced a new tax to target underused housing in Canada owned directly or indirectly and wholly or partly by non-resident, non-Canadians.
All owners, other than Excluded Owners, must file a return to either pay the tax or to claim an exemption for situations where no tax is owing. Failure to file may result in significant penalties.
The tax is calculated based on 1% of the value of residential real estate that is owned by any non-resident or non-Canadian and that is considered vacant or underused during the year.
Affected Owners must file their 2022 UHT return by April 30, 2023. If the UHT applies, payment of taxes must be remitted by April 30th or interest will be charged at the prescribed rate.
Excluded Owners – Exempt from UHT Obligations
- Individual who is a Canadian citizen or permanent resident who owns the property in their name
- Property owned by the following types of trusts is excluded – a mutual fund trust, real estate investment trust, specified investment flow-through trust (SIFT), or an estate controlled by the executor
- Canadian corporation whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
- Registered charity for Canadian income tax purposes
- Cooperative housing corporation for Canadian GST/HST purposes
- Indigenous governing body or a corporation wholly owned by an Indigenous governing body
Affected Owners – Required to file UHT Return
- Individuals who are not Canadian citizens or permanent residents
- Canadian controlled private corporations (CCPCs) and other privately held Canadian corporations
- Any person, including an individual who is a Canadian citizen or permanent resident, that owns a residential property as a partner of a partnership
- The trustee of a trust that owns a Canadian residential property (other than an estate as referenced above under “excluded owners”)
- A Canadian corporation without share capital–this would include many not-for-profit corporations
Note that affected owners with multiple residential properties must file separate UHT returns for each property, and if you are a joint owner, each affected owner must file separate UHT returns.
Available Exemptions
An affected owner is liable for the UHT unless they’re eligible to claim an exemption based on:
- location and use of the property
- availability of the property
- occupant of the property
- type of owner
Affected owners must file their UHT return to claim the exemption. If a return is filed later than December 31 of the following year, the exemption will be denied and UHT will be charged in addition to a late-filing penalty for failing to meet the deadline.
Reportable Properties
Residential property includes:
- detached houses or similar buildings with no more than three units (including cottages, cabins, and chalets unless they are considered commercial property)
- semi-detached houses, row-house units, residential condominium units, and similar separate or divided premises such as a coach house or laneway house
Non-Compliance Penalties
Failure to file each annual UHT return can result in significant penalties. Late-filing penalties are the greater of:
- $5,000 for individuals or $10,000 for owners other than an individual; and
- the sum of:
- 5% of the UHT for the year
- 3% of the UHT for the year multiplied by the number of months the return is late
About Vohora LLP
Vohora LLP has been providing professional accounting, tax, audit and assurance, and business advisory services for over 40 years. Since founded in Prince Rupert, BC in 1975, we have been working collaboratively with our clients to understand their financial goals. Our team of Chartered Professional Accountants (CPAs) specializes in helping individuals and businesses of all sizes with any of their accounting and tax needs. We have since expanded and now have established offices in Vancouver, Surrey, Mission, Prince Rupert, Terrace and Smithers, and service clients anywhere in British Columbia. Please call (604) 541-9890 or use our online contact form to book an appointment with one of our accounting professionals.
Disclaimer
The preceding information is for educational purposes only. The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Vohora LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs so a further review should be done by a qualified professional.