Understanding Canada’s Underused Housing Tax (UHT)

As of June 20, 2024, amendments to Canada’s Underused Housing Tax Act (UHTA) became law with the passing of Bill C-69. The Underused Housing Tax (UHT) is an annual 1% federal tax on vacant or underutilized residential properties in Canada, effective since January 1, 2022. Designed primarily to address housing availability, this tax affects specific property owners based on ownership and property use. Here’s what you need to know:

1. Purpose of the Underused Housing Tax

The UHT aims to encourage property owners to make better use of residential properties that are either vacant or underutilized. With an escalating housing demand in Canada, the tax is one of several measures aiming to increase housing availability for Canadian residents.

2. Who Needs to Pay the Underused Housing Tax?

While the tax primarily targets foreign owners with Canadian housing that is vacant or underused, some Canadian property owners are also required to comply. Owners that may be affected include certain partners, trustees, and corporate entities. Determining whether you need to file a UHT return requires understanding whether you are considered an “affected” or “excluded” owner, which can be clarified using online tools provided by the Canada Revenue Agency (CRA).

3. Filing Deadlines and Penalty Exceptions

The deadline to file UHT returns and pay the tax for both the 2022 and 2023 tax years was April 30, 2024. During this initial phase, the CRA provided an extension that allowed affected property owners to file without facing penalties or interest. However, missed deadlines or late filings will generally incur penalties, so timely filing is essential.

4. Calculating and Paying the UHT

The tax is calculated as 1% of the assessed value or the fair market value of the property. Owners required to pay the UHT can file their returns by following CRA guidelines, which include methods for calculating the tax and record-keeping requirements. Payment options for individuals and corporations vary, so it’s important to follow the correct procedures to avoid penalties.

5. How to Determine Your UHT Responsibilities

Property owners who are uncertain about their filing responsibilities can use CRA’s interactive tools. These tools help clarify whether they need to file, what exemptions may apply, and which payment methods are available. Exemptions are determined based on various criteria, including property type, occupancy, and owner residency status.

6. Provincial and Municipal Vacancy Taxes

It’s important to note that the UHT is a federal tax separate from any provincial or municipal vacancy taxes. Some provinces and cities in Canada, including Vancouver and Toronto, have their own vacancy taxes. Property owners need to check if they’re subject to multiple vacancy taxes, as the requirements and exemptions may differ.

7. Resources and Further Assistance

For additional information, property owners can consult the Underused Housing Tax multimedia toolkit and access technical information provided by CRA. If there are any questions regarding the tax, filing requirements, or exemptions, CRA provides support resources for individuals and corporations navigating this tax.

To stay compliant with the Underused Housing Tax Act, property owners should stay informed on filing deadlines, exemptions, and how to calculate the tax. As this legislation evolves, the UHT may continue to impact property use in Canada, encouraging a more accessible housing market across the country.

For the latest updates, visit the full text of Bill C-69 on the Parliament of Canada website.