Canadian residential property owners must consider new underused housing tax filing requirements

TUESDAY, MARCH 14, 2023

A new underused housing tax (UHT) will result in a 1% tax on the value of certain vacant or underused residential property.  Although these rules will only cause a tax liability for a small fraction of the owners, it will result in many more needing to file a UHT return. If the form is not filed, or late filed, than a penalty of a minimum of $5,000 for individuals and $10,000 for corporations will apply.

 The new tax and form requirements are relevant for those who own residential property having 3 dwellings or less. As a result, apartment buildings are generally excluded; however, ownership in separate condominium units is included.

 The rules apply differently for these three groups:

For Canadian corporations, partnerships and trusts with foreign owners there may be a tax requirement in addition to the need to file.  For those in this circumstance we recommend a careful review of the legislation.

In summary, the UHT obligates many corporations, trustees and partners holding residential real estate to meet annual reporting requirements.  Taxes payable will generally only arise for (a) non residents or (b) entities with partial ownership from non residents.

The deadline to file is April 30 regardless of when your income tax filing is due.

 Please reach out if you have any questions.