The Underused Housing Tax is new legislation that imposes filing obligations on many owners of residential property. This new law creates a filing burden far beyond the scope of simply underused housing. If you own additional residential property that is not your primary residence, you may be required to file a UHT return.

**If after reading this article, you determine your property is required to file a UHT return, please contact us immediately, as we would be happy to assist you. It is important to contact us quickly, as the filing and payment deadline is April 30th, with failure to file penalties of up to $10,000 per property.

Basic parameters of this new tax

If you or your corporation were the legal owner of a residential property in Canada as of December 31st, you may be required to file an annual return.

The new Underused Housing Tax (UHT) imposes a 1% annual tax on the value of the residential real
estate that is deemed vacant or to be underused and it is owned as of December 31st. This tax follows a calendar year, and therefore tax filings are due on April 30th of the following year.

If you are deemed an “excluded owner” by the CRA, then you are not required to file a UHT return.

If you are deemed an “affected owner”, you must file a UHT-2900, Underused Housing Tax Return and Election Form. Please contact us immediately if you require assistance in filing this return.

Which properties are subject to UHT?

Your principal residence is not subject to the UHT. Residential properties that are subject to UHT are as follows:

- Detached houses (which contains up to three dwellings)
- Semi-detached houses
- Rowhouse units
- Residential condos
- Any other similar premises intended to be owned as a separate unit or parcel.

A “dwelling” is deemed to be a single unit residential property that has its own kitchen, bath and living
area. A residential property can include land considered to be necessary for its use and enjoyment.
Generally, up to a half hectare of land that is subjacent and immediately contiguous to a residential
building is considered necessary for the building's use and enjoyment as a place of residence.

Examples of buildings that are not residential properties:

- Quadruplexes (buildings that have four dwellings)
- High rise apartment buildings
- Buildings that are primarily (more than 50%) for retail or office use and that contain an
apartment.
- Commercial condo units
- Boarding houses and lodging houses
- Commercial cottages, cabins, and chalets
- Hotels, motels, inns, and bed and breakfasts
- Floating homes
- Mobile homes
- Park model trailers
- Travel trailers, motor homes and camping trailers

If your property is not considered a “residential property”, filing a UHT return is not required.

Excluded owners:

If you are an excluded owner, you do not have to file a UHT.
“Excluded owners”, fit one of the following criteria as of December 31st:
- You are a Canadian citizen or permanent resident of Canada (unless you hold the property in the
capacity of a trustee of a trust or as a partner on a partnership).
- Your corporation is a publicly listed Canadian corporation, listed on a Canadian stock exchange.
- You are a trustee of a mutual fund trust, real estate investment trust, or specified investment
flow-through trust.
- The organization that owns the property is a registered charity.
- The organization that owns the property is a co-operative housing corporation.
- The organization that owns the property is an indigenous governing body.
- The organization that owns the property is a certain other public institution and/or
governmental body.

If none of the above apply to you or your corporation, and you own a residential property, then you are deemed an “affected owner” by the CRA and you must file a UHT return by April 30th.

Affected owner exemptions:

As an affected owner, you must file a UHT return. You must assess whether you and your property
meet one of the following exemptions from paying tax.

*Most of our corporate clients who own residential property in their corporation(s) are exempted from
paying tax because they are Canadian Controlled Private Corporations (CCPC’s). But filing a return will still be required.

Additional exemptions are as follows:

1) Type of owner of the property

- A specified Canada partnership
- A specified Canadian trust
- A new owner – meaning that you acquired the property in the year and did not own the
property in the last 9 years.
- The owner passed away in the year or in the prior year.
o You are the personal representative of the deceased individual; the exemption applies
for both the year of death and the subsequent year, and you were not the owner of the
property in either of those years.
o A co-owner, where another co-owner owned at least 25% of the property at their death,
the exemption applies for the year of death and the subsequent year.

2) Availability of use of the property

- If the property is under construction
- If construction of the property is not substantially completed before April of the tax year.
- If constriction of the property is substantially completed between January 1st and March 31st,
and it is put up for sale to the public during the year.
- The property is not suitable to live in year-round, it is a seasonal residence.
- The property is uninhabitable, which means at least 60 continuous days, due to a disaster or
hazardous conditions.
- Property is uninhabitable, which means at least 120 consecutive days, due to major renovations.

3) Occupancy of the property

- This property was your primary place of residence for the year. Or it was for your spouse,
children or dependents attending a designated post secondary institution.
- Or one of the following individuals continuously lived at the property for at least 180 days of the
year (only counting periods of at least one month at a time).
o An arms length individual who lives at the property under a written agreement.
o A non-arms length individual who lives at the property under a written agreement.
o The owner or the owner’s spouse if they are working under a Canadian work permit.
o A citizen or permanent resident of Canada who is the owner’s spouse, parent, or child.

4) Location and use of the property

- Vacation property located in an eligible area of Canada. If the property is located in a specifically
identified, less densely populated area, and is used by the owner or their spouse for at least 28
days, it will be exempt. See the UHT vacation property designation tool to determine eligible
regions. UHT Vacation Property Designation Tool

If you met any of the exemptions set out above, then you will have no tax payable when you file your
UHT return, but filing a return is still required.

Calculating the Tax Payable

If you did not meet any of the exemptions above, then you will have a tax bill upon filing your UHT
return. The tax will be 1% of the greater of:
a) The property’s assessed value for the year for the property for tax purposes and
b) The most recent sale price on or before December 31, applied to the ownership percentage.

Filing Requirements and Penalties

All “affected owners” must file a return for each property owned on December 31st of the calendar year.
Failure to file by the deadline will be subject to penalties to the greater of:

c) $5,000 for individuals, $10,000 for corporations or otherwise,
d) And the total of:
a. 5% of the UHT and
b. 3% of the UHT for each complete calendar month the return is late.

Late payments will be subject to interest at a prescribed rate, compounded daily.

Corporations who are deemed “affected owners” and must file a UHT Return
The following steps must be followed before we can successfully file a UHT return for your corporation:

STEP 1) Inform us immediately of your corporation’s residential property ownership.

STEP 2) APPLY FOR AN “RU” ACCOUNT WITH THE CRA

You must use a business number (BN) with an Underused Housing Tax (RU) program account identifier code to file your UHT return. This is a similar concept to your HST account or your payroll account. The RU account will be your business number followed by RU0001. i.e., xxxxxxxxxRU0001
You will have to register your RU program account before we can file your return. Only the business
owner can perform this step.
To register, follow the link: Register for your RU program account - click here
Please be mindful of the date in which you register for your RU account, as you will need the registration date for step 3.

STEP 3) OBTAIN A DIGITAL ACCESS CODE
Apply for a digital access code to allow us to e-file your UHT return. Without this code, we cannot
electronically file your return and instead must file your return by mail.
A digital access code must be applied for after you have obtained your RU account. To successfully
obtain a digital access code, you will need the following information readily available:

 Underused Housing Tax account number (RU number)
 Registration date
 Name of owner
 Postal code, ZIP code or country code of mailing address