What is the Underused Housing Tax in Canada?

Last updated: Nov. 23, 2023 

Update: The deadline to file your 2022 Underused Housing Tax Return, without penalties or interest, has been extended to April 30, 2024.

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On June 9, 2022, the Underused Housing Tax (UHT) Act passed Royal Assent and became law. It is a tax on the ownership of vacant or underused residential housing and is the first federal law intended to deter foreign ownership of vacant real estate in Canada.

Here we’ll provide information on the UHT, its rules, exemptions and what you’ll need to know to file if this applies to you and your property.

What is the Underused Housing Tax?

The UHT is effective as of January 1, 2022, and is a 1% tax applied to certain residential properties that are considered “underused” and are owned (at least in part) by certain entities.

The tax typically applies to non-resident, non-Canadian owners, however, in some situations, it may also apply to Canadian owners.

Who has to file the Underused Housing Tax return?

The tax is charged in specific situations as in when properties left primarily vacant are owned by non-Canadian citizens or non-Canadian permanent residents, but to claim an exemption to this tax, a return must be filed.

If you or your business falls into one of the following categories, you must file an Underused Housing Tax return:

• Most private Canadian corporations that own most types of residential properties
• Non-Canadian citizens and non-permanent residents who own residential property
• Individuals who are trustees of a trust which owns residential property (with some exceptions for testamentary trust situations)
• Partners of a partnership which owns residential property

Who are affected owners or excluded owners to the Underused Housing Tax?

As defined by the Government of 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

An “excluded owner” of a residential property in Canada has no obligations or liabilities under the Underused Housing Tax Act.

As defined by the Government of Canada, 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 above
• 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

Exemptions to the Underused Housing Tax

Your ownership of a residential property may qualify for exemption from the Underused Housing Tax depending on:

• the type of owner you are (for example, a new owner in the calendar year)
• the availability of the residential property (for example, a newly constructed property)
• the location and use of the residential property (for example, a vacation property that is used by you or your common-law partner for at least 28 days in the calendar year)
• the occupant of the residential property (for example, it is your primary place of residence)

As an affected owner of a residential property in Canada, you still need to file an Underused Housing Tax return for the residential property for the calendar year, even if you are exempt from paying the tax.

How much is the Underused Housing Tax?

The UHT rate is 1% of your property’s value.

To figure out how much you owe, multiply the property’s value by the 1% tax rate. Then multiply that result by your ownership percentage of the property.

Your ownership percentage must be registered with land titles. If you are the only registered owner of the property, you are liable for 100% of the tax owing.

The property value is the higher of:

1. Its assessed taxable value or
2. Its most recent sale price on or before December 31 of the calendar year

You have the option to use fair market value instead, but you must file an election with the Canada Revenue Agency (CRA) and provide a professionally prepared appraisal of the property.

Here’s a sample calculation:

Your property’s value is $649,000 and you own 50% of the property.

1. Calculate the total UHT on the property:
   • $649,000 property value × 1% UHT = $6,490
2. Calculate your tax liability based on your ownership percentage:
   • $6,490 × 50% ownership = $3,245

Your individual UHT liability is $3,245.

What if I own more than one property?

If you are an affected owner of two or more properties in the calendar year, you must file a separate UHT return for each property.

What if I co-own my property?

If you are an affected owner who shares ownership of a residential property with another affected owner (with more than 10% ownership), each of you must file separate UHT returns. This applies even if your ownership qualifies for an exemption.

Ownership percentages used in the calculation must match those registered with land titles.

Here’s another sample calculation:

Your shared property’s taxable value is $875,000.

You own 75% of the property and your affected co-owner of the property owns 25%

1. Calculate the total UHT on the property:
   • $875,000 property value × 1% UHT = $8,750
2. Calculate your tax liability based on your ownership percentage:
   • $8,750 × 75% ownership = $ 6,562.50
   • Your individual UHT liability is $6,562.50
3. Your affected co-owner’s UHT liability is:
   • $8,750 × 25% ownership = $ 2,187.50
   • Your affected co-owner’s UHT liability is $2,187.50

Again, you must each file a UHT return and pay the tax liability for the residential property by the deadline.

When do I file my Underused Housing Tax return?

For 2022, the deadline to file without penalties or interest, has been extended to April 30, 2024.

Generally:

• The deadline for filing your return is April 30 for the previous calendar year
• The deadline to pay any UHT owing is also April 30 for the previous calendar year
• If you’ve chosen to use the fair market value of your property to calculate your tax liability, the election must also be filed by April 30

If April 30 falls on a weekend, the deadline will be the first business day following.

CRA update for 2022 UHT returns:

Penalties and interest will be waived if your return is received and amounts owing are paid by April 30, 2024.

As well, the deadline for making any elections for 2022 is also April 30, 2024. Elections can be made within your Underused Housing Tax return.

If you have elected to use the fair market value (FMV) for a residential property, for your calculation for 2022, the FMV must have been established between January 1, 2022, and April 30, 2023.

IMPORTANT: You must also keep records to support the filing of your return and the calculation of your tax liabilities. Even if you do not have to pay the tax, you must keep your records. You also may be denied an exemption if you do not have adequate records to support it.

You must keep these records for a minimum of six years after the end of the calendar year to which they apply.

What do I need to file my Underused Housing Tax return?

You need a tax identifier number for individuals or corporations

For individuals the following numbers may be used depending on the situation:

• Social Insurance Number (SIN)
  • for use by Canadian citizens, permanent residents or those who already have a SIN
• Individual Tax Number (ITN)
  • if you do not have a SIN, you must use an ITN to file your return
  • if you do not have an ITN, you must apply for one
• Canadian business number (BN) and an Underused Housing Tax (RU) program account identifier code
  • for use by individual non-residents of Canada
  • If you do not have a BN, you can apply for one here
  • Apply for your RU number online here

Corporations require:

• A business number (BN) and
• Underused Housing Tax (RU) program account identifier code
• If you do not have a BN, you can apply for one here
• Apply for your RU number online here

You need the following information to complete the return

To complete the UHT return, you will need:

• Form UHT-2900
• Information on you and your property or properties including:
  • Personal identification information and citizenship status
  • If the property is owned by a partnership or trust, you must provide their account numbers
  • Property ID used in the land registration system
  • Property tax or assessment roll number (as applicable)
  • Residence type (detached, semi-detached, etc.)
  • Property value
  • Purchase date and ownership percentage

There are questions you must answer if you have multiple properties, if you are filing for an exemption or an election to use the fair market value of your property instead of the assessed value for taxation purposes.

How do I file my Underused Housing Tax return?

As of this article’s publishing date, you can file your return electronically or through the mail to either the Winnipeg or Sudbury Tax Centres.

The location to which you must mail your return depends on your place of residence as an individual, or the physical address of your corporation.

In mid-March you will have the option to file through CRA My Account.

What happens if I don’t file my Underused Housing Tax return?

Penalties for not filing the UHT return can be significant!

For individuals, the penalty is the greater of $5,000 and a percentage of the UHT taxes owing, and for corporations, the penalty is the greater of $10,000 and a percentage of the UHT taxes.

This means that the lowest amount of penalty that would apply would be $5000 for individuals and $10,000 for corporations.

What happens if I pay my Underused Housing Tax after the deadline?

If your payment is not received by the April 30 deadline*, you will be charged interest on the amount owing.

Interest will be compounded daily starting on the first day after which the tax was required to be paid and ending on the day the tax is paid.

*or the first business day following if April 30 falls on a weekend

I still have questions about the Underused Housing Tax

Many Canadian property owners are unaware of or are not concerned about the UHT as they do not believe it impacts them. While you may not have a tax obligation under the Underused Housing Tax Act, you may have an obligation to file.

If you’re unsure about your status as a residential property owner in Canada or need help filing, consult with a tax specialist.

We can help with your UHT filing

70 years ago, we were founded on the belief that Canadians should receive every benefit of filing their taxes.  To this day, our focus hasn’t changed. We support Canadian business owners just like you, to bring you financial peace of mind and help you hold on to more of your hard-earned money.

We help you pay less tax and will support your back office needs through affordable bookkeeping and payroll services.

We have a team that can help you get your UHT filing completed. Click below to submit a request for help.

Are you an FBC Member and need help with your UHT Return? Click here to submit a request to our team.

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