What is the Underused Housing Tax and does it affect you?

March 15, 2023 Category News, Uncategorised

What is the Underused Housing Tax Act and does it affect you?

The Underused Housing Tax Act is new federal legislation which imposes an annual tax on the ownership of applicable residential property and took effect on January 1, 2022.

Many Canadians will not need to pay the tax that is imposed by the Act,but may still have to file an annual return in order to claim an exemption from such tax.  This is an important distinction because the Act imposes significant fines on anyone who is required to file an annual return, but fails to do so, even if they would ultimately be exempt from the tax itself.

Exempt owners include:

  • the federal and provincial crown and agents thereof;
  • Canadian citizens and permanent residents holding property in their own rights (not as trustees or partners in a partnership);
  • publicly traded Canadian corporations;
  • trustees of: mutual fund trusts, REITs, and SIFT trusts;
  • registered Charities;
  • cooperative housing corporations,
  • municipalities and public institutions,
  • Indigenous governing bodies and their wholly owned corporations; and
  • prescribed individuals.

Owners who qualify for an exemption but will still have to file an annual return commonly include:

  • non-citizens or permanent residents who own a property that is the primary residence of themselves, a qualifying relative, or a qualifying tenant;
  • qualifying Canadian Corporations;
  • partners of qualifying Canadian Partnerships; and
  • trustees of trusts for qualifying beneficiaries.

Every owner, other than excluded owners, owning property as of December 31st, must file a return by April 30th of the following year.  Canadian citizens and permanent residents who hold property personally, even if they own multiple pieces of vacant residential property, are likely not affected by the Act.  (Note however that BC’s Speculation and Vacancy Tax Act may still apply to such properties).