The federal Liberal government created the Underused Housing Tax (UHT) on underused (i.e. vacant) residential properties owned by non-resident non-Canadians. THE UHT came into effect January 1, 2022.

The UHT applies in addition to the 20% the Non-Resident Speculation Tax.

On December 31st of each year, every non-Excluded Owner of residential property, must file a return and pay tax equal to 1% of their ownership share of the value of the property. They can elect a fair market value or default to the prescribed value, if any, or the property’s most recent sale price.

The UHT basically applies to non-residents non-Canadians as Excluded Owner includes a government, a citizen or permanent resident of Canada, a publicly listed corporation incorporated federally or provincially, a trustee, a registered charity, a coop, hospital, municipality, college or university, an Indigenous governing body or a prescribed person.

The UHT is not payable if the property:

• is the primary residence occupied by the owner, their spouse or common-law partner or a child of them if occupying for the purposes of study;
• has more than 180 days qualifying occupancy period, defined as:
  • an occupation for at least one month by an arm’s length individual with a written lease, or
  • a non-arm’s length individual with a written lease not paying below the fair rent;
• is occupied by the owner, their spouse or common-law partner in Canada pursuing authorized work under a Canadian work permit;
• is occupied by the owner, their spouse or common-law partner that is a citizen or permanent resident or a prescribed individual.

The penalty for not filing a required return is $5,000 for an individual or $10,000 if not an individual, plus 5% of the tax otherwise payable for the calendar year and 3% of the tax otherwise payable multiplied by the number of complete months from the date the return was required to be filed. Any non-payment attracts daily compound interest at the prescribed rate.

We are often retained to act on transactions for non-resident non-Canadian purchasers and although we do not do the UHT filing it is imperative that they are made aware of their UHT filing obligations so that they can comply through their tax accountant.

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