May 1, 2023 is the due date for filing of 2022 annual returns and, where applicable, payment of Underused Housing Tax under the Underused Housing Tax Act, S.C. 2022, c. 5, s. 10 (“UHTA”) and the Underused Housing Tax Regulations, 2022, c. 19, s. 116 (the “Regulation”).

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UHTA introduces filing requirements for a wide range of residential property owners as well as an annual 1% tax on the ownership of certain vacant or underused housing in Canada.

Affected residential property owners must file an annual UHT return for the preceding year, due April 30th. A broad range of residential property owners must file a return, including certain owners whose properties are not vacant or considered underused housing. There are significant monetary penalties for not filing a return.

The requirements of UHTA are discussed in more detail below.

Filing Requirements

Every Owner of Residential Property who is not an Excluded Owner on December 31, must file a return for that calendar year by April 30th of the following year (May 1, 2023 being the first business day after April 30), even if exempt from a requirement to pay the Underused Housing Tax. The scope of owners who must file an annual return is much more extensive than the scope of owners who must pay the tax. The UHT return includes information about the citizenship status of the owner(s), the address and type of property, assessment and land title information, the names and ownership percentages of the property and whether an exemption is being claimed. A separate return must be filed for each Residential Property and be each person with an ownership interest in the property.

Meaning of “Owner” of “Residential Property”

Under the UHTA, an “Owner”, with respect to a Residential Property, includes a life tenant under a life estate, a life lease holder and a person that has continuous possession under a long-term lease. “Residential Property” means property in Canada and includes detached houses with up to three dwelling units, semi-detached houses, rowhouse units and condominium units.

Meaning of “Excluded Owner” and “Affected Owner”

Excluded Owners are not required to file a UHT return or pay Underused Housing Tax.  An Excluded Owner includes, but is not limited to:

  • an individual who is a citizen or permanent resident of Canada, except individuals who are owners in their capacity as a trustee of a trust (other than some personal representatives in respect of a deceased individual) or a partner of a partnership;
  • a public Canadian corporation;
  • a person that is an owner of the residential property in their capacity as a trustee of a mutual fund trust, a REIT or a SIFT trust;
  • a registered charity;
  • a cooperative housing corporation; and
  • an Indigenous governing body or a corporation wholly owned by such a body.

Anyone who is not an Excluded Owner is an Affected Owner. Affected Owners include foreign corporations, private Canadian corporations, trustees of a trust, and partnerships. Affected Owners must file under the UHTA, regardless of whether tax is payable by the owner, and either claim an applicable exception under the UHTA or pay UHTA tax.

Penalties for Failure to File

There are significant penalties for not filing a return, even if the Affected Owner is eligible for an exemption under the UHTA. The minimum penalty is $5,000 for individuals and $10,000 for corporations and all other cases. The penalty may be greater depending on the amount of tax payable under UHTA and how late the filing is.

Underused Housing Tax

Affected Owners must pay the 1% tax unless their ownership qualifies for an exemption. Affected Owners may be exempt from the tax (but not necessarily from the requirement to file) depending on the type of owner they are, the availability of the residential property, the location and use of the residential property and the nature of the occupancy of the Residential Property.

EKB’s Commercial Real Estate team would be pleased to assist you with understanding and complying with UHTA. To find out more about how UHTA and the Regulation will impact you, please contact David Allman.