The new Underused Housing Tax came in effect January 1, 2022, and is mostly applicable for those who own residential property in Canada and are NOT Canadian Citizens or are NOT permanent residents.
In a nutshell, the UHT is a one-percent tax on the value of non-resident, non-Canadian owned residential real estate that is considered to be vacant or underused.
The tax generally applies to foreign national owners of housing in Canada. However, in some situations, this tax also applies to some Canadian owners such as certain partners, trustees, and corporations (including non-profits). Generally, they may not have to pay the tax, but they may have to file a return and claim an exemption.
There has been much confusion about who must file the return and you can view the CRA info by searching CRA Underused Housing Tax.
In Manitoba, there is likely not much vacant or underused residential properties, compared to other larger cities like Vancouver and Toronto, so likely no taxes to be paid, but you may need to file!
You may be considered an affected owner and should determine if you need to file the return even if exempt from the tax.
The filing due date was April 30, 2023, but since this is the first year, CRA has waived the penalty and interest if filed by October 31, 2023. And even if you are an affected owner but exempt from the tax, you need to file by the deadline to avoid the penalty of not filing!
If you own property and it is being held in a formal trust for, say another family member, then you will need to file the return even though no taxes will be payable.
If you are a trustee for an Estate Trust and you are acting as a personal representative of a deceased individual, you are considered an excluded owner and you have no obligation under the UHT for the year of death or the following year. But after that, you will be an affected owner and need to file the return even though you may be exempt from the tax.
I have a non-profit organization that I complete financial statements and a non-profit corporate tax return for them. I remembered that they also have a residential suite above their store. They need to file the return even though they will be exempt from paying taxes for a couple of reasons: it has been occupied for more than 180 days and it is located in town less than 30,000 population. But they still need to file the return. They are affected owners, but will be exempt from paying the tax.
I am checking with a few of my clients to confirm they are Canadian Citizens or are Permanent Residents. I need to make sure that if they are not, then they may need to file the return even if there is no taxes payable.
The penalty can be $5,000 if you are an affected owner and even if you do not need to pay the tax! So, if you are not sure, check the CRA site for the UHT to find out if you need to file even if there is no tax to be paid.
Non-resident owners will generally have to file the UHT return and will either qualify for an exemption, or failing that, be subject to the tax. Exemptions from the tax are for affected owners, include those for whom the residential property is their primary place of residence, or that of their spouse / partner or a child studying at an education institution for the year. Other exemptions include those based on the availability, location or use of the residential property.
This can be complicated, so if you are a non-Canadian or a private-corporation or a non-profit corporation that owns residential property, I recommend you check out the CRA site for the UHT. They have an excellent page to Determine if you are an affected or excluded residential property owner. I have used it a few times to check to see if any of my clients, individuals or non-profits, need to file the UHT return by October 31, 2023.
Anni Markmann is a Personal Income Tax Professional and Certified Financial
Planner; living, working, and volunteering in our community. Contact Ste
Anne Tax Service at 204.422.6631 (phone or text!) or 36 Dawson Road in
Ste Anne (near Co-op) or email@example.com