What you need to know about the Underused Housing Tax(UHT)
You may have already heard about the Underused Housing Tax that was recently announced. Please click on this link for details: https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html#1. It is important that you review this information.
If you are an affected owner of a residential property in Canada on December 31, 2022 you will have to file an Underused Housing Tax return due April 30, 2023 (likely, you won’t owe UHT tax but still have to file).
There are significant penalties if you fail to file a return when it is due. Affected owners who are individuals are subject to a minimum penalty of $5,000. Affected owners that are corporations, trusts and partnerships are subject to a minimum penalty of $10,000.
The onus is now on you to determine if are you an “affected owner”. This is described in the above link. As well, I have also attached a quick reference chart that simplifies this determination.
Areas of concern for individuals:
- If you are on title for residential property on behalf of someone else (ie. a child), expert opinion has indicated that this may be a trust relationship. Trustees must file the UHT return.
**It is important that you confirm who has legal ownership of each property and determine if a trust exists (you may need a legal opinion).
- If you own residential rental property with someone else, this may be considered a partnership. Partnerships must file the UHT return.
**Note: CRA has indicated that most of the time, if you own the rental property with one or more persons, you are considered to be a co-owner (co-owners do not need to file the UHT return). Please refer to attachment discussing Partnership vs. Co-Owner for further information. Ultimately, it is your decision to determine if you are in a partnership or co-ownership. It is important that you confirm who has legal ownership of each property.
NOTE: If you own residential property in a corporation, and we have not already communicated with you directly, please reach out to your contact at the firm to discuss in more detail. Corporations are required to file if they own a residential property.
I have included the link(and the form) to the UHT-2900 Underused Housing Tax Return and Election Form: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/uht-2900.html. Once completed, this return can be mailed or faxed and details are included on the return.
The federal government’s new UHT may be aimed primarily at non-residents of Canada but as the legislation is currently written, the UHT is overly broad and many Canadians are being caught. That is why It is important for you to review this information to determine if you may be an “affected owner”.