As of January 1, 2022, Canada imposed an Underused Housing Tax (UHT), an annual 1% tax on vacant or underused housing ownership, including recreational properties. It’s billed as a foreign ownership tax, so Canadian individuals are exempt. However, the tax does capture property held in corporations and trusts.
See more details about the Underused Housing Tax from the CRA.
If you have more questions about your specific situation, we’re happy to help. We take the hassle out of tax season so you can focus on what’s important – growing your business.
Do you need to file?
There are three types of residential property owners:
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No reporting or payment is required
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Excluded Owners fall into this category - see Excluded Owners section below
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- Owners that must report and pay
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Non-excluded Owners are referred to as Affected Owners and unless they qualify for an exemption, they have to report and pay the tax
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- Owners that must report but not pay
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- Affected owners that qualify for an exemption must report the property on their taxes, but will not have to pay. See Exempt Properties section below
If you have a recreational property, you may have to declare it on your taxes this year. Even if you don’t have to pay the 1% tax, you must still declare the property.
How do you calculate it?
UHT Tax Payable = 1%* (Property Value * Ownership %)
When’s it due?
The tax is due by April 30.
What are the penalties for not reporting?
Failure to declare the property on your taxes will result in a $5000 penalty for individuals and $10,000 for a corporation!
Excluded owners
Canadian individuals are exempt and have no obligations or liabilities under the Underused Housing Tax Act. Excluded owners also include:
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Publicly traded Canadian corporations
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Certain trusts
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Registered charities
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Cooperative housing corporations
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Municipal organizations
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Other public institutions, government bodies, or Indigenous governing bodies
Exempt properties
A residential property may be exempt, at least for a period of time, if:
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It was the primary place of residence for the owner, the owner’s spouse or common-law partner, or the owner’s child.
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The property was occupied for at least 180 days in the year, comprised of one or more periods of at least one month by various qualifying occupants.
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The property was not suitable for year-round use as a place of residence or was inaccessible during part of the year.
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The property was uninhabitable for at least 60 consecutive days in a calendar year due to disaster or hazardous conditions.
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The property was uninhabitable for at least 120 consecutive days in a calendar year due to renovation or where construction of the property was not substantially completed before April of the calendar year.
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The property was substantially completed after March of the year, was offered for sale to the public and was not previously occupied.
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The owner first acquired the property during the year (by sale or transfer).
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The exemption applies to the year the owner died and the following calendar year.
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The property was owned by a Canadian corporation with less than 10 percent foreign ownership.
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The property was owned by partnership partners, and all members were either excluded owners or specified Canadian corporations.
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The property was owned by a trustee of a trust where all beneficiaries with interest in the property were either excluded owners or specified Canadian corporations.
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Based on census data, the property was located in a prescribed area, and the owner, spouse, or common-law partner resided in the property for at least 28 days in the calendar year.
It’s important to note that each of these circumstances has its own specific rules and requirements that must be met to qualify for the exemption, and not all owners may be eligible for these exemptions. Therefore, consulting with a tax professional or the Canada Revenue Agency (CRA) for more information on the rules and regulations is advisable.
Our Chartered Professional Accountant (CPA) professionals have extensive knowledge of the changing tax laws. Let us help you with deductions, write-offs, expenses, tax returns, GST filing and more.
Read more about Corporate Tax and Personal Tax topics relevant to you and your small business.
