UHT Returns are due annually on April 30. However, on March 27, 2023, the Canada Revenue Agency provided transitional relief and effectively extended the deadline to file 2022 UHT Returns to October 31, 2023. This was intended to provide affected owners more time to comply with this new legislation.
WHAT IS THE UHT?
The UHT is an annual 1% tax payable by an "owner" (other than an "excluded owner") of "residential property." An owner that is not an excluded owner is referred to as an "affected owner." All affected owners will need to file a UHT Return annually, even if no tax is owing.
The messaging from the government is that the UHT usually applies to non-resident, non-Canadian owners. While it may be true that the tax is generally only payable by non-resident, non-Canadian owners, most Canadian corporations and many Canadian individuals will need to file a UHT Return even if no tax is owing.
Some commentators have quipped that "underused" is a misnomer and the UHT is not about housing that is underused but about residential property that is not being used in a particular manner.
WHO IS AN "OWNER"?
Generally, an "owner" is the individual or corporation that is registered in the land registration system where the property is located.
WHO IS AN "EXCLUDED OWNER"?
There is a specific list of owners that are "excluded owners." Excluded owners are not required to file a UHT Return.
Excluded owners include:
- An individual who is a citizen or permanent resident.
- Exception: The individual is an owner of the residential property in their capacity as a trustee of a trust (other than a personal representative in respect of a deceased individual). This can include, for example, a parent that is registered on title to help a child secure a mortgage or an adult child that is on title to a parent's home for estate planning purposes.
- Exception: The individual is an owner of the residential property in their capacity as a partner of a partnership. It appears possible, depending on the facts, that this can include a situation where spouses hold property that is used in a business that they carry on together with a view to profit.
- Public corporations.
- Mutual fund trusts, real estate investment trusts, SIFT trusts.
- Registered charities.
- Cooperative housing corporations, hospital authorities, municipalities, public colleges, school authorities, or universities.
- An Indigenous governing body as defined in section 2 of the Department of Indigenous Services Act or a corporation wholly owned by such a body.
Notably, a private Corporation is not an excluded owner and is required to file a UHT Return. This can include, for example, nominee corporations or corporations that are acting as a bare trustee.
WHAT IS A "RESIDENTIAL PROPERTY"?
Broadly speaking, a "residential property" includes the following:
- A detached house or similar building, containing not more than three dwelling units.
- A part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises.
Apartment buildings with four or more units are not a "residential property." However, for apartment buildings that are condominiums or have a strata, each condo or strata unit may be a separate residential property. In this context, a separate UHT Return must be filed by each owner for each unit.
Notably, vacant land and property under construction is not considered to be a "residential property" for UHT purposes. Further, how the property is zoned for municipal zoning purposes should not be relevant.
WHO NEEDS TO FILE?
All owners of residential property that are affected owners are required to file a UHT Return. Need help? The Canada Revenue Agency recently launched an interactive tool. Note, however, that the results are not binding on the Canada Revenue Agency and are dependent on the accuracy of the information that is entered.
IF A UHT RETURN MUST BE FILED, DOES THAT MEAN TAX IS OWING?
No. There are many exceptions from paying the tax! Many people who are required to file a UHT Return will not have to pay UHT. However, they will still be assessed a failure to file penalty if the UHT Return is not filed on time.
The exceptions can generally be grouped into four categories:
- Based on the owner of the property.
- Based on the availability of the property.
- Based on the occupant of the property.
- Based on the location and use of the property.
We previous summarized some of the UHT exceptions in our article "The new Underused Housing Tax: Are you tax exempt?"
HOW MUCH IS THE FAILURE TO FILE PENALTY?
For an individual, the failure to file penalty is $5,000 per residential property. For a corporation, the failure to file penalty is $10,000 per residential property.
These penalties are higher than failure to file penalties under other tax legislation. For affected owners with multiple properties, these penalties can add up to a very significant amount of money.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
