The Underused Housing Tax (UHT) is now law, and if you own residential property in Canada, you will want to take note. While the UHT is generally designed to tax residential properties considered vacant or underused ⁠–⁠ and not owned by Canadian citizens or permanent residents of Canada ⁠–⁠ many individuals, corporations, trustees, executors and partners who hold legal title to residential real estate in this country may have to file a UHT return by April 30, 2023*, even if no tax is owing, or potentially face steep penalties.

Generally, if you did not own residential property on Dec. 31, 2022 or you are a Canadian citizen or permanent resident of Canada who personally owned residential property (not as a trustee of a trust or partner of a partnership), you are excluded from filing a return. While there are a few other exclusions, almost all other individuals, Canadian private corporations, trustees, executors and partners will need to file a separate UHT return for each residential property owned, whether or not the tax applies.

The penalty for failing to file your return by April 30 is the greater of:

• $5,000 for individuals or $10,000 for non-individuals (such as corporations); and
• 5% of your UHT payable for the residential property for the calendar year plus 3% of your UHT payable for the residential property for the calendar year multiplied by the number of complete calendar months the return is past due.

Baker Tilley WM LLP has published a Tax Alert, including a UHT test, to assist you in determining whether you need to file a UHT return and whether you may owe the 1% tax on the property’s value.

CREDIT: Baker Tilley WM LLP