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Canada's Underused Housing Tax: Implications for Foreign + Canadian Property Owners

Underused Housing Tax (“UHT”) is an annual federal tax payable by registered owners of vacant or underused housing in Canada, that took effect on January 1, 2022.  The purpose of the UHT is to tax non-Canadians who own residential property in Canada that is not being used efficiently, to try to address Canada’s affordable housing shortage. This tax, which is 1% of the value of the property, generally applies to foreign (non-Canadian, non-resident) residential property owners, however, in some situations, it can apply to Canadians. 

If you are a Canadian, you may be affected if you are registered on title to a residential property in Canada, but you have no beneficial interest in that property.  If this is the case, you are considered to hold the property as a bare trustee. 

This may occur if your name is registered on title to a residential property:

  • because you are as the trustee of a trust (excluding as executor of an estate);
  • owned by another person (typically a family member such as a parent or grandparent) for probate purposes or administrative ease;
  • that is an asset of your corporation or partnership with the related income tax reported by the corporation or partnership; or
  • to assist another person (typically a child) obtain a mortgage.

In most of these situations, the registered owner will be able to claim an exemption and will not need to pay the UHT, however, you must still file a return to claim an exemption, and significant penalties apply if a UHT return is not filed on time.

The original filing deadline for the UHT was May 1, 2023, however, the Canada Revenue Agency has postponed this deadline twice and is now allowing late filing for the 2022 tax year only.   No penalties or interest shall be applied for UHT returns and payments for the 2022 tax year that the Canada Revenue Agency receives on or before the deadline for the 2023 tax year on April 30, 2024. 

As there are strict time limits and penalties, we recommend that you contact your accountant to determine whether you are required to file a return.  Should you have questions regarding how these new rules affect your estate and incapacity planning, please contact Malkit Atwal, Farha Salim, Lisa Statt Foy or Kristin Yarish