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Canada's Underused Housing Tax (UHT)
The UHT Affects Canadians Also! - including co-owners of property
 | Affected owners |
| Excluded owners - revised for 2023 calendar year |
| Canadian Citizen or Permanent Resident - Trustee of a Trust (e.g. joint owner without beneficial ownership, or owner not on title) |
| Canadian Private Corporation |
| Non-Resident Non-Canadians |
2023 Fall Economic Update Changes to the UHT
- not yet in effect, but UHT Return modified to add specified Canadian corporations, trusts and partnerships to the definition of excluded owner, right on the UHT-2900 form.
See March 2024 UHTN16 Proposed Amendments to the Underused Housing Tax - Revised definition of excluded owner for 2023 and later years.
Who is an Owner of Residential Property?
What Does "Residential Property" Mean?
Partnerships And The Underused Housing Tax
The Basics of the UHT - How Much is the Tax? The Form
UHT Payment and Annual Return Due Date
Penalties For Not Filing the Underused Housing Tax Return
Filers of the UHT Form Must Have an Identification Number (SIN, ITN or BN + RU)
| Digital Access Code Online |
Will My Accountant/Tax Preparer File the UHT Return For Me? Maybe Not!
My Accountant Says I Don't Need to File the UHT Return - will they pay the penalty if they are wrong?
Underused Housing Tax Resources
Government of Canada / Canada Revenue Agency Resources - expanded Q&A UHTN15
Provincial/Federal Taxes on Property
Legislation
Underused Housing Tax Regulations
The legislation for the Underused Housing Tax Act was included in Bill C-8, An Act to implement certain provisions of the economic and fiscal update, which received Royal Assent on June 9, 2022. It was originally proposed in the Federal 2021 Budget.
The UHT Affects Canadians Also!
Affected Owners
All owners other than "excluded owners" must file a UHT return if they own residential property located in Canada, on December 31st of the calendar year.Affected owner is a term used by Canada Revenue Agency (CRA) to describe those who must file an Underused Housing Tax (UHT) return. It is not a term used in the legislation for the UHT. Affected owners are those who are not excluded owners. If they are exempt from the tax affected owners must still file a UHT return, or face penalties.
From CRA:
Who is an Affected Owner, Examples of Affected Owners that will have to file the UHT return even if they are exempt from the tax, in order to claim the exemption.
Determine if you are an affected or excluded residential property owner - keep in mind that a property does not have to be zoned residential to be considered a residential property for the UHT.
Excluded Owners
Effective for the 2023 calendar year, although the draft legislation has not yet been tabled as a Bill (as of February 29, 2024), specified Canadian corporations, partners of specified Canadian partnerships, and trustees of specified Canadian trusts, are considered excluded owners instead of affected owners, and will not have to file the UHT return. To effect this change, CRA has modified the definition of excluded owner in form UHT-2900. They will still have to file for the 2022 calendar year.
See March 2024 UHTN16 Proposed Amendments to the Underused Housing Tax - Revised definition of excluded owner.
Canadian Citizen or Permanent Resident - Trustee of a Trust
Note: A UHT return for a trust requires a Trust account number. The application for this should be done online, and done as soon as possible, in order to get the trust account number quickly.
Is your name on the title of a residential property, but you do not have beneficial ownership? Do you have beneficial ownership, but your name is not on the title? This is a bare trust. To quote a tax professional who was quoting a tax lawyer, "You likely have a trust unless every beneficial owner is on title and everyone on title is a beneficial owner". A beneficial owner is entitled to the proceeds of sale if the asset is sold.
A "bare trust" owning residential property is affected by the UHT, and the trustee must file the UHT return. Most people are not even aware of what constitutes a bare trust. There are many examples, including when a property is placed into joint ownership with one of the joint owners having legal ownership but not beneficial ownership.
A few examples, but there are many more:
- Parent who puts adult child on title for estate-planning purposes only, no beneficial ownership transferred. The residence is the primary place of residence of the parent.
- Adult child who puts parent on title for financing purposes only, no beneficial ownership transferred. The residence is the primary place of residence of the adult child.
- Trustee of a family trust which holds residential property in trust for the beneficiaries.
These are very common situations.
In situation #1, the adult child must file the 2022 UHT return as trustee of a trust. If the parent is a citizen of Canada, then the trust is a specified Canadian trust, and no UHT will be payable.
In situation #2 the parent must file the 2022 UHT return as trustee of a trust. If the adult child is a citizen of Canada, then the trust is a specified Canadian trust, and no UHT will be payable.
In situation #3, the trustee must file the 2022 UHT return. If all beneficiaries of the trust are citizens of Canada, then the trust is a specified Canadian trust, and no UHT will be payable.
New November 21, 2023: Effective for the 2023 calendar year, if the trust is a specified Canadian trust, it will be considered an excluded owner and will not have to file the UHT return. However, the 2022 UHT return must still be filed. See March 2024 UHTN16 Proposed Amendments to the Underused Housing Tax - Revised definition of excluded owner.
See CRA's Underused Housing Tax Notice 15 (UHT 15) Questions about trusts, which has been updated to provide a lot more detail, and examples.
A Canadian citizen or permanent resident will have to file a UHT return if they are an owner of the property in their capacity as a trustee of a trust (other than a personal representative in respect of a deceased individual) or as a partner of a partnership. Most of these people will likely be exempt from the tax, but will pay a minimum $5,000 penalty per person per property if they do not file.
For more information see Do you have a bare trust? What that means for Underused Housing Tax (UHT) by RHN Chartered Professional Accountants.
Tax Tip: If you're in doubt as to whether you have to file a UHT return, get professional advice, or just file the return!
Canadian Private Corporation
Publicly-traded corporations are excluded owners, while private corporations are not.
A Canadian private corporation must file a 2022 UHT return if they own residential property in Canada on December 31st of the calendar year. Most Canadian private corporations will likely be exempt from the tax as they will be considered a specified Canadian corporation, but will pay a minimum $2,000 penalty per failure to file (reduced from $10,000 per failure by the 2023 Fall Economic Statement) if they do not file.
New November 21, 2023: Specified Canadian corporations will be considered excluded owners for the 2023 and subsequent calendar years, and will not have to file the UHT return. See March 2024 UHTN16 Proposed Amendments to the Underused Housing Tax - Revised definition of excluded owner.
Non-Resident Non-Canadians
Non-resident non-Canadians must file a UHT return if they own residential property in Canada on December 31st of the calendar year. Whether the tax is payable will depend on whether they are eligible for any exemptions.
2023 Fall Economic Update Proposed Changes to the UHT
See Underused Housing Tax in the 2023 Fall Economic Statement.
Elimination of Filing Requirement for Certain Owners, But Not for 2022 Calendar Year
Currently, exemptions from the UHT can be claimed by:
| specified Canadian corporations |
| partners of a specified Canadian partnership |
| trustees of a specified Canadian trust |
However, to claim the exemption, these individuals, corporations and trusts must file the UHT return. For the 2023 calendar year, they are considered "excluded owners" and will not have to file the UHT return, as per the Notice of Ways and Means Motion released April 30, 2024. They still were required to file for the 2022 calendar year, by April 30, 2024. Prior to this release, Form UHT-2900 was modified to show that the form was not required to be filed for 2023 by specified Canadian corporations, partners and trusts.
Proposal to Reduce Minimum Failure to File Penalties
Effective for the 2022 and subsequent calendar years, proposal to reduce the minimum penalty:
| for individuals, from $5,000 to $1,000 per failure |
| for non-individuals, from $10,000 to $2,000 per failure |
Proposal to Exempt Certain Employee Accommodations
| Proposal to introduce a new UHT exemption for residential properties held
as a place of residence or lodging for employees
|
Proposed Technical Changes
| provide that unitized ('condominiumized') apartment buildings are not "residential property" for UHT purposes, effective for 2022 and subsequent calendar years; and |
| ensure that an individual or a spousal unit can claim the UHT "vacation propert" exemption for only one residential property for a calendar year, effective for 2024 and subsequent calendar years (not for 2022 or 2023 calendar years). |
Summary of Proposed Changes
Ottawa to exempt Canadians from underused housing tax filings, with one exception from the Chartered Professional Accountants of Canada.
Who is an Owner of Residential Property?
An owner is a person that is identified as an owner in the land registration system or other similar system, or that could reasonably be considered to be an owner based on such a system, and includes a person that
| is a life tenant under a life estate in respect of the residential property |
| is a life lease holder in respect of the residential property, |
| has, under a long-term lease, continuous possession of the land on which the residential property is situated, or |
| is a prescribed person, |
but does not include
| a person that gives continuous possession of all the land on which the residential property is situated to persons referred to in paragraph (b) or (c), or |
| a prescribed person. |
The regulations do not yet include any definition for a prescribed person.
What Does "Residential Property" Mean
A "residential property" does not have to be zoned residential.
In the Underused Housing Tax Act, residential property is property (other than prescribed property) situated in Canada that is:
| a detached house or similar building, containing not more than 3 dwelling units, together with that portion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals; |
| a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real or immovable property owned, or intended to be owned, apart from any other unit in the building together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or |
| a prescribed property. |
A dwelling unit means a residential unit that contains private kitchen facilities, a private bath and a private living area.
There is no definition yet of "prescribed property" in the UHT regulations. Because the property will be prescribed by regulation, any additions in this category will not require legislative approval.
It's possible that the prescribed property category may in future include vacant land within large urban areas, as promised in the 2021 Liberal Platform (page 23 of the pdf).
What is a Residential Property - from Canada Revenue Agency (CRA).
Partnerships And The Underused Housing Tax
New November 21, 2023: Effective for the 2023 and subsequent calendar years (but not 2022), partners of specified Canadian partnerships (generally, a partnership whose partners are exclusively Canadian), will be considered excluded owners, and will not have to file the UHT return. They must still file the 2022 UHT return in order to claim their exemption. See Underused Housing Tax in the 2023 Fall Economic Statement.
Under Canadian provincial and territorial common law statutes, a partnership is defined as the relation (or relationship) that subsists (or exists) between persons carrying on a business in common with a view to profit. This is from Canada Revenue Agency's Income Tax Folio S4-F16-C1, What is a Partnership?
As CRA says: if two individuals characterize their relationship as a partnership for Canadian income tax purposes, it may be difficult for them to characterize their relationship as something else for UHT purposes.
The T776 Statement of Real Estate Rentals for in tax software requires the taxpayer to indicate whether they are a sole proprietorship, partnership, or co-owner. Will this affect whether each person has to file the UHT return? The answer to this question seems to be YES, even if the rental income is characterized on the tax return as property income, not business income.
See UHTN15 updated September 29, 2023 from CRA: Questions about partnerships, which addresses joint owners as well as joint owners of a rental property, but still will not provide concrete answers about partnership status for many people.
Tax Tip: If in doubt as to whether filing the UHT return is necessary, get legal advice, or just file the return to avoid the huge penalties!
Farmers and the UHT Return
Most farms across Canada must file a UHT return, because most are either partnerships or corporations. For some of the issues related to farmers see Farm groups call for exemption to filing Underused Housing Tax forms. However, as per the 2023 Fall Economic Statement, if the partnership is a specified Canadian partnership, the UHT return will not have to be filed. See above.
Situation re Farmers:
| Land is purchased by a couple as joint owners, with a view to living there eventually. |
| Several years later owners start building their home. |
| Around the same time, they begin a farming (or other) business. |
| Their farming (or other) business is registered as a partnership, and the partnership has a business number with CRA. |
| Only the joint owner individuals are on the title for the property - the partnership is not on title as a registered owner. The property was not transferred to the partnership. |
Question: Is the residential property owned by the couple in their capacity as partners of a partnership? The answer to this question is YES. It may be necessary to get legal advice to be sure of the answer in your particular situation.
The Basics of the UHT / How Much is the Tax? / The Form
The UHT is effective January 1, 2022, for the 2022 calendar year, and is payable by May 1, 2023.The annual tax is 1% of the value of underused or vacant residential property.
An exemption from the tax may be available to be claimed by the owner of the property. Exemptions are claimed by filing the UHT form.
The tax is based on the taxable value of residential property located in Canada considered to be vacant or underused. Taxable value means an amount that is:
| a prescribed amount; or if no amount is prescribed, the greater of
| ||||
| A person may elect to use the fair market value of the property. |
Completing Form UHT-2900
A separate return must be filed by each owner for each property owned, using Form UHT-2900 Underused Housing Tax Return and Election Form. The pdf form has 2 pages of "Additional Information" at the end the provides information that is useful in completing the form.
Even for owners who are exempt from the tax, the following information must be completed on the form:
| Part 1: Information about the owner
| ||||||||||||||||||||||
| Part 2: Information about the residential property:
|
The following parts of the form are completed depending on your circumstances:
| Part 3: Multiple residential properties:
| ||||||
| Part 4: Exemption for primary place of residence:
| ||||||
| Part 5: Exemption for qualifying occupancy:
| ||||||
| Part 6: Other exemptions:
|
The following parts of the form are completed when there is no exemption from the tax:
| Part 7: Fair market value (FMV) election:
| ||||||
| Part 8: Calculation of tax payable:
|
The last part of the form is completed by all filers:
| Part 9: Election and return certification:
|
*Note: The Canadian Home Builders' Association (CHBA) received an interpretation letter from CRA stating that a person need not report the assessed value and most recent sales price of a residential property in situations where no tax is payable in respect of the residential property. For links to the interpretation, see the Video Tax News April 2023 Life in the Tax Lane video, which indicates it is not clear if this interpretation is meant just for CHBA members, or for the general public, and there restrictions to this interpretation.
UHT Payment and Annual Return Due Date
The due date for the Underused Housing Tax return, election for fair market value, and the payment of tax for a calendar year is April 30th of the following calendar year.
The first UHT return due date was May 1, 2023, because April 30th is a Sunday. See below re CRA announcement re penalties & interest waived.
Penalties For Not Filing the Underused Housing Tax Return
Penalties now waived if 2022 UHT Returns are filed by April 30, 2024!
See October 31, 2023 news release Government of Canada extends deadline for homeowners to file the Underused Housing Tax return.
March 27, 2023 CRA Announcement - UHT penalties and interest will be waived for any late-filed UHT return and for any late-paid UHT payable, provided the return is filed or the UHT is paid by Tuesday, October 31, 2023. The deadline is still April 30, 2023 (May 1, since April 30th is a Sunday), but penalties and interest will not be applied for UHT returns and payments that the CRA receives before November 1, 2023.
Many private Canadian corporations, trusts and partnerships will be exempt from the tax, but must still file the return (UHT-2900 Underused Housing Tax Return and Election Form), in order to claim their exemption.Effective for the 2022 and subsequent calendar years, the minimum penalty is reduced:
| for individuals, from $5,000 to $1,000 per failure |
| for non-individuals, from $10,000 to $2,000 per failure |
See Underused Housing Tax in the 2023 Fall Economic Statement.
In addition to the minimum above penalties, add:
| 5% of the tax calculated for the calendar year, plus |
| 3% of the tax calculated multiplied by the number of complete months that the return is late. |
If an affected owner fails to file a return by December 31 of the following calendar year, the 5% and 3% penalties will be calculated based on the tax that would be payable if most exemptions were not available.
See s. 47 Penalties in the Underused Housing Tax Act.
Assessment Period
The limitation period for assessments for the UHT, according to s. 36(1) of the Act, is four years after the tax became payable. However, there are exceptions that result in no limitation period, including if a person fails to file a UHT return for a property. In other words, there is no time limit for CRA to assess the person for the tax, penalties and interest for that year.
For more information on this and examples of how a person could easily not realize they should have filed, see the LinkedIn post by Noah Sarna, Commodity Tax Partner at Thorsteinssons Tax Lawyers.
Tax Tip: The penalties are huge - talk to your tax advisor to determine if you are an affected owner, and if you're unsure, you may want to file the return to avoid penalties - but see announcement above!
Filers of the UHT Form Must Have an Identification Number (SIN, ITN or BN + RU)
An individual who is a Canadian citizen or permanent resident must use their social insurance number (SIN) to file their return.
An individual who is not a Canadian citizen or permanent resident who already has a SIN will use their SIN to file their return. If they do not have a SIN, they must use an individual tax number (ITN) to file their return. If they do not have an ITN they must apply for one using form T1261 Application for a Canada Revenue Agency Individual Tax Number (ITN) for Non-Residents.
A business must use a business number (BN) with an Underused Housing Tax (RU) program account identifier to file their return.
| If they already have a BN, they will have to register their RU program account before they can file a return. |
| If they do not have a BN they must apply for one and register their RU program account before they can file a return. |
| Corporations will be able to register their RU program account online after February 6, 2023. |
The Filing the Return information from CRA has a link for corporations to use to register their RU program account online.
Digital Access Code Online
To file the UHT return online using the webform, you will have to obtain a Digital Access Code Online.
Tax Tip: Get your tax identification number or Digital Access Code Online as soon as possible if you don't have one already!
Will My Accountant/Tax Preparer File The UHT Return For Me?
This is not part of annual tax preparation, so don't expect that the tax preparer/accountant who files your tax returns for you will automatically file the Underused Housing Tax (UHT) return.
Many firms are deciding to not file these returns, and those that will prepare and file them will probably charge a substantial fee.
My Accountant Says I Don't Need to File the UHT Return
Not all accountants are well-versed in the complications of who has to file the UHT return. If your accountant says you don't have to file, make sure they know all your circumstances, put their advice in writing, including that they will pay the penalty of $5,000 per individual per property or $10,000 per non-individual per property if they are wrong. If they won't do this, don't rely on their advice only.
Underused Housing Tax Resources
Many tax and accounting organizations are trying diligently to make this legislation understandable:
Advisor.ca September 25, 2023: CRA offers no relief on stiff penalties for late-filing UHT returns
LinkedIn Post by Cathy Williams, CPA, CA with practical notes on the Underused Housing Tax (UHT) filing - very useful, including the comments on the post.
Quick Reference Chart for the Underused Housing Tax - from the Video Tax News team
Escape Room 2 - The NEW Real Estate Owner Tax Game - High Stakes Edition by Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr - answer a series of questions to see if you escape filing the UHT return, and if you escape paying the tax.
LinkedIn post by Noah Sarna, Commodity Tax Partner at Thorsteinssons Tax Lawyers - includes examples of when a person could easily not realize they should be filing the UHT return.
UHTA: Corporations, partnerships and trustees beware! by Ben Berci, Baker Tilly Canada
- includes very useful Underused Housing Tax (UHT) Flowchart
Digging into the Underused Housing Tax Act by John Oakey, CPA, on the CPA Canada website
Tax Identifier Number for the Underused Housing Tax - CPA Canada News January 27, 2023
Underused Housing Tax - Fazzari+Partners LLP, Chartered Professional Accountants
Trust and estates beware of the new Underused Housing Tax by John Oakey, National Tax Director for Baker Tilly Canada
Video Tax News Life in the Tax Lane December 2022
Government of Canada / Canada Revenue Agency Resources
Underused Housing Tax Technical Information including Underused Housing Tax Notices (UHTNs)
Expanded September 2023: Questions and Answers About the Underused Housing Tax
UHT-2900 Underused Housing Tax Return and Election Form
Budget 2021 Annex 7: Consultations on Other Tax Measures: Supplementary Information - search (ctrl-f) or scroll down to Tax on Unproductive Use of Canadian Housing by Foreign Non-resident Owners.
Economic and Fiscal Update 2021 - Tax Measures - Underused Housing Tax
Excise and GST/HST News - No. 112 - Underused housing tax program
Provincial/Federal Taxes on Property
BC Speculation and Vacancy Tax and City of Vancouver Empty Homes Tax
Ontario Taxes on Property - includes Foreign Buyers Tax, Ottawa and Toronto Vacant Home taxesRevised: October 29, 2024