CCI Toronto News
Federal Underused Housing Tax
Filing Deadline May 1, 2023
In June, 2022, the Underused Housing Tax Act came into force with an effective date of January 1, 2022. The purpose of this legislation was to introduce the Underused Housing Tax (UHT), which is calculated as a 1% tax on the value of residential property. The tax is aimed primarily at non-resident, non-Canadian owners of residential property that is considered to be vacant or underused.
Under the enabling legislation, specified people and entities that own residential property in Canada are considered to be “excluded owners”, and are not subject to the UHT. “Excluded owners” include (but are not limited to) individuals who are Canadian citizens or permanent residents, among others. Of note, “cooperative housing corporations” are expressly included in the definition of “excluded owners”. CCI-Toronto has reached out to the Canada Revenue Agency to request guidance as to whether the CRA will be adopting a sufficiently expansive definition of this term so as to potentially encompass condominium corporations, and will provide an update if and when such guidance is received.
Any person or entity that owns residential property in Canada and that does not fall into the definition of “excluded owners” is considered to be an “affected owner”. “Affected owners” are required to file an annual return with the CRA (which is due by April 30 of the following year), and are required to pay the UHT unless their residential property qualifies for an exemption from the UHT. The available exemptions include (but are not limited to) property that is the primary residence of the owner (or their spouse or child), property that was occupied for at least 180 days (made up of one or more periods of at least one month) during the year in question, seasonal property that is not suitable for year-round use, or property owned by a “specified Canadian corporation”. “Specified Canadian corporation” is defined as including any corporation that is incorporated under the laws of a province of Canada, and whose directors are all Canadian citizens or permanent residents. Of note, “affected owners” who claim an exemption from the UHT for a given year are still required to file an annual return.
For condominium corporations that own residential property (e.g., a guest suite or a superintendent’s suite), provided that the CRA does not adopt a sufficiently expansive definition of “cooperative housing corporation” to encompass them, it is likely that they would be required to file the annual UHT return, but would be exempt from paying the UHT unless one or more of the directors is neither a Canadian citizen nor a permanent resident. It should be noted that failing to file the annual return can carry a fine of up to $10,000.00 for corporations. In all cases, condominium corporations should seek professional advice from their auditor or other qualified professional, and ensure that their UHT returns, if required, are attended to during this year’s tax season.