Underused Housing Tax: avoid CRA penalties
Update 2023-11-21: The 2023 Fall Economic Statement proposes that Canadian Corporations, Partnerships, and Trusts no longer be required to report on the UHT for years 2023 and onward. It also proposes that as of 2022 and onward the minimum penalties for failing to file be reduced to $1000 for individuals and $2000 for corporations. CFIB will keep members updated as we learn more abut these proposed changes.
For calendar year 2022, the application of penalties and interest under the UHT will be waived for any late-filed underused housing tax (UHT) returns and for any late-paid UHT payable, provided the return is filed, or the UHT is paid, by April 30, 2024.
The Underused Housing Tax is a new annual tax on the ownership of vacant or underused housing in Canada. The tax is aimed at non-residents of Canada, but there are situations where Canadian citizens, residents, and corporations will be required to file a 6-page return for each of their owned residential properties.
As of January 1, 2022, if your name or the name of your business is on the land title of a residential property, you may be required to file an Underused Residential Housing return. Failing to do so may result in a penalty for late filing, which is $5000 for individuals and $10,000 for corporations.
Who must file & who must pay?
If you answer all three questions with a yes as of December 31 of a calendar year then you must file an Underused Housing Tax return to CRA:
- Is the property residential?
- Are you an owner of the residential property?
- No exclusions/exemptions apply to you?
We have created a flow chart to help you with this.
How to file the UHT and any elections
Affected owners must submit a 6-page form for each of their residential properties, even if they don't owe the tax. You must have a Social Insurance Number (SIN), Individual Tax Number (ITN), or a Canadian business number (BN) with an Underused Housing Tax (RU) program account identifier code before you submit. The UHT-2900 return can be filed by:
What is CFIB doing about this?
- We have written a letter and discussed the issue with the Minister of Revenues, CRA administration, and the Department of Finance.
- We advocated for (and got) the penalties and interest deadline waived until October 31, 2023.
- We are working with CRA to ensure their forthcoming resources are approachable and understandable, keeping small business in mind
Should you have any questions or concerns please feel free to contact our BR Advisors or CRA.
What is a partnership?
For the purposes of the UHT, this definition is found in your province’s partnership act.
Generally, “Partnership is the relation which subsists between persons carrying on a business in common, with a view of profit” with or without a written agreement. More details can be found in Income Tax Folio S4-F16-C1, What is a Partnership?
What is a specified Canadian partnership?
A partnership who by the end of the calendar year or later are any of the following:
- Excluded owners
- Canadian citizens or permanent residents of Canada who would have been excluded if they were not owners of residential property as a partner of a partnership
- Specified Canadian corporations
If my spouse and I co-own property, does that mean we are in a partnership?
This depends on a few factors so you may need to speak to an accountant or lawyer. More clarification can be found in CRA’s FAQs.
What is a specified Canadian Trust?
A trust whose beneficiaries that have a beneficial interest in a residential property are all, on December 31, excluded owners or specified Canadian corporations.
What is a specified Canadian corporation?
A corporation that is federally or provincially registered on December 31st of the calendar year where:
- Less than 10% of the ownership or control, directly or indirectly, of the shares are held by someone who is NOT a Canadian citizen, permanent resident, a federally or provincially registered corporation, or a combination of the above.
CRA: Exemptions for Specified Canadian Partnerships, Trusts and Corporations.
What about Farmers who house temporary foreign workers?
CRA have shared that this housing is typically provided in the form of:
- Dorm housing – Not residential under the UHT
- Mobile homes – Not residential under the UHT
- Houses – may be subject to the UHT
Should you have any questions or concerns about these, feel free to contact CRA or our business advisors.
What about principal residences?
- A Canadian or permanent resident business owner who owns or co-owns a primary residence in which they live should normally not have to file.
- A non-Canadian or non-resident business owner who owns or co-owns a house as their primary residence in which they live will normally have to file but should be able to claim an exemption.
What is a residential property?
Examples of residential property include:
- detached houses
- duplexes and triplexes
- laneway houses and coach houses
- cottages, cabins and chalets that are not commercial cottages, cabins and chalets
- semi-detached houses
- residential condominium units
- rowhouse units or townhouses
Examples of non-residential property include:
- quadruplexes (buildings that have four dwelling units)
- buildings that are primarily (more than 50%) for retail or office use and that contain an apartment
- commercial cottages, cabins and chalets (that is, those that are used by the operator of an establishment to provide lodging to several unrelated business or leisure travellers at once in separate cottages, cabins or chalets)
- hotels, motels, inns, and bed and breakfasts
- mobile homes
- commercial condominium units
- boarding houses and lodging houses
- park model trailers
- travel trailers, motor homes and camping trailers
How much is the UHT (payable tax)?
(1%)(Fair Market Value* or Taxable value)(ownership %)
*There is an election that allows the use of the fair market value of the residential property
When must the tax be paid?
By April 30 of the following year.
There is transitional relief for the first applicable tax year, 2022, where the return is due by April 30, 2023. Although the deadline for filing the UHT return and making payments is still April 30, 2023, no penalties or interest will be applied for UHT returns and payments that the CRA receives before November 1, 2023.