Back in March 2023, I made a post describing how the Underused Housing Tax (UHT) Act applies to a wide scope of people aside from non-Canadian residents who own vacant residential property.
Since that time, more has come to light with respect to who needs to file a UHT return, even if it can be established that no UHT is actually payable. It’s crucial that the public is made well aware of this given that the penalties for late filing a UHT return include a substantially high flat charge –$5,000 for individuals, and $10,000 for corporations. This flat charge is not a derivative of UHT actually owed, which is unlike the more common late filing penalties associated with personal tax (T1), corporate tax (T2), and GST/HST filings.
To-date, the following groups of people are considered to be “affected owners”, hence not “excluded owners” under the UHT Act, and are required to file a 2022 UHT return by October 31, 2023, to avoid the penalties noted above:
- Canadian citizens and permanent residents who own residential investment property in a Canadian corporation (including residential properties that were converted for complete use in commercial activities);
- Two or more Canadian citizens and permanent residents who jointly own residential investment property and manage the property in common in the form of a business (can be seen to be a “partnership” as per CRA’s recent interpretations).
- Individuals or corporations that hold residential property in trust for beneficiaries who are not themselves, including family members (i.e. each trustee would be subject to filing a UHT return for their respective share of ownership). This is especially relevant for estate plans that have bare trusts / “nominee corporations”.
- Deceased individuals who would have otherwise been seen as an “affected owner” for UHT purposes before their death – not even death can escape one from UHT filings!
In September, a spokesperson from the Canada Revenue Agency (CRA) confirmed that they do intend to assess penalties where applicable accordingly. Therefore, we cannot be relying on another “educational period” of saving grace to get around paying these large penalties.
I would also expect that the CRA will be quick to send out assessments for late filing penalties (or at least send out inquiry notices) as they can use computers to cross-check records between properties declared on previous tax returns and the legal title owners on provincial land registration systems. For example, checking to see if there is a Canadian private corporation listed as a legal owner of a residential property can be an automatic flag for the CRA to link up to a UHT return filed.
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In order to learn more about the UHT Act, along with how to navigate through the “grey areas”, check out the course I recently published, available on CPDFormula: https://cpdformula.com/course/the-underused-housing-tax-act-a-comprehensive-walkthrough
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