WHAT IT IS: The Underused Housing Tax is a tax on the value of non-resident, non-Canadian owned residential property that is considered to be vacant or underused. The tax has an annual reporting requirement and tax liability calculated at 1% of the property’s value. The due date for filing the return is April 30. HOW IT’S CALCULATED: The amount owed is calculated by multiplying the value of the residential property (typically its taxable value) by the 1% UHT rate. That value is then multiplied by your ownership percentage of the property. WHO DOES IT AFFECT: Affected owners include:
an individual who is not a Canadian citizen or permanent resident
an individual who is a Canadian citizen or permanent resident and who owns a residential property as a trustee of a trust (other than as a personal representative of a deceased individual)
any person - including an individual who is a Canadian citizen or permanent resident - that owns a residential property as a partner of a partnership
a corporation that is incorporated outside Canada
a Canadian corporation whose shares are not listed on a Canadian stock exchange designated for Canadian income tax purposes
a Canadian corporation without share capital
WHO HAS TO FILE: All affected owners must file an Underused Housing Tax return for each residential property owned in Canada on December 31. You must also pay the UHT unless your ownership qualifies for an exemption for the calendar year. Regardless of whether your ownership qualifies for an exemption, and you do not owe any tax, you must still file an UHT return for the calendar year. EXEMPTIONS: There may be exemptions depending on:
The type of owner you are (specified Canadian corporation, new owner in calendar year, deceased owner)
The availability of the residential property (newly constructed, seasonally inaccessible, uninhabitable due to renovations or hazardous conditions)
The location and use of the residential property (vacation property located in eligible area of Canada)
The occupant of the residential property
Apart from individual Canadians, excluded owners may include publicly traded Canadian corporations, registered charities, cooperating housing corporations, certain trusts, municipal organizations and other public institutions and government bodies.
PENALTIES FOR NOT FILING:
There are significant penalties for failure to file an Underused Housing Tax return when it is due:
Individuals – minimum penalty of $5,000
Corporations – minimum penalty of $10,000