Effective January 1, 2022, the government implemented a new Underused Housing Tax (UHT) which is intended to be a 1% tax on the value of a residential property that is vacant or underused. While the announcements have indicated that Canadian citizens and permanent residents would be exempt from the tax, there are still filing requirements for many Canadian citizens and permanent residents. All UHT tax returns for 2022 are due on April 30, 2023 and the penalties for late filing start at $5,000 per return.
CRA has only just recently released information on how this tax filing will be administered, and they have left many questions unanswered.
Here are some important highlights to be aware of:
Where a filing requirement applies, each owner on title must separately file a return.
If you have a corporation that owns residential property, the corporation WILL be required to file. The minimum late filing penalty for corporations starts at $10,000.
Property held as inventory in a construction business may also fall under the filing requirements.
There are some exemptions for recreational properties based on seasonal accessibility and postal code. You can use this tool to see if it applies to your property.
Trustees of Trusts that own residential property will also be required to file. It is unclear at this point whether that includes parents on title to kids properties and other similar situations.
This new tax filing is complex. While we anticipate that the majority of you will not be subject to the tax itself, there will be many who are still required to file the tax return.
You can find the UHT form here and more information from CRA here.