From UFile's tax expert Gerry Vittoratos.
What is the UHT
The Underused Housing Tax (UHT) is an annual 1% tax that took effect on January 1, 2022. It is charged to non-resident, non-Canadian owned residential real estate in Canada that is considered to be vacant or underused.
Who is expected to pay it?
All property owners might be subject to the 1% tax, with the exception of “excluded owners.” These are:
Starting in 2023, “specified Canadian corporations” (over 90% of shares are Canadian owned), partners of “specified Canadian partnerships” (all partners are Canadian) and trustees of “specified Canadian trusts” (beneficiaries are exclusively Canadian) will also be excluded owners.
Anybody who is not an excluded owner is considered an “affected owner” and might be subject to the UHT. Affected owners may be able to qualify for an exemption from the UHT (see section below), but they must file the annual information return to declare their exemption. Excluded owners do not have to file any return or pay the tax.
From the list of excluded owners above, we can clearly see that the federal government is targeting non-residents who own property in Canada which they are underusing.
Exemptions for affected owners
As mentioned above, an affected owner would be subject to the UHT for the calendar year unless they qualify for an exemption in respect of their interest in the property for that calendar year. Affected owners qualifying for an exemption are required to file the annual declaration and claim the applicable exemption.
Exemptions are:
How is the UHT calculated?
The UHT represents 1% of the assessed value of the property (property tax bill). However, the owner could elect to charge the tax on the property’s fair market value instead. The tax is charged on an annual basis.
What forms are required?
Form UHT-2900 is a new annual information return that was created to pay for the tax or claim an exemption for affected owners. The return is ordinarily due by April 30th of the following calendar year. However, the CRA has extended to April 30, 2024, the deadline to file the 2022 return.
Penalties will apply for affected owners who file late, even those who qualify for an exemption.
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