Are You Required to File an Underused Housing Tax Return?

On June 9, 2022, the Underused Housing Tax Act (“UHTA”) received Royal Assent and took effect on January 1, 2022. The Underused Housing Tax (“UHT”) is designed to levy a 1% annual tax on non-resident, non-Canadian persons owning a vacant residential property. Despite this targeted objective, the UHTA imposes a tax return filing obligation on a broad swath of persons who are not ultimately liable to pay UHT. In addition to non-resident persons, Canadian resident private corporations, trustees (including a trustee of a bare trust), and individuals who hold land as a member of a partnership or a beneficiary of a trust, may be required to file an Annual UHT Return (Form UHT-2900).

The deadline for filing a return under the new federal UHTA in respect of an interest in residential property owned during the 2022 calendar year is April 30, 2023. However, the Canada Revenue Agency (“CRA”) recently announced that interest and penalties will not be imposed in respect of UHT returns for the 2022 year that are filed on or before October 31, 2023. The CRA imposes severe penalties to those who are late filing returns – a minimum of $5,000 for individuals, and $10,000 for corporate filers. As a result, if you own an interest in residential property in Canada, either directly or indirectly, it is critical that you determine your tax filing obligation under the UHTA.

Please visit the Government of Canada website for more information about the Underused Housing Tax. For assistance in determining your compliance obligation under this novel act, we encourage you to contact a member Torkin Manes’ Commercial Real Estate or Tax Groups.

We would like to acknowledge Torkin Manes’ Articling Student Sam Cullen for his invaluable contribution in drafting this bulletin.