As part of the 2021 Federal Budget, the Government of Canada announced plans to add an annual tax of 1% on the value of residential real estate owned by any non-resident, non-Canadian that is considered vacant or underused. The rules for UHT were enacted June 9, 2022 for residential properties owned at December 31st each year starting December 31st, 2022.
The UHT rules require residential property owners to file an annual return, unless certain exemptions apply, even if no tax would be due.
The annual return and any tax owing is due April 30th of the following year. You can download the online form here.
Do you, your company, partnership or trust need to file the annual return?
An “excluded owner” is not subject to UHT and does not have to file an annual return. You are considered an excluded owner on December 31st if you are one of the following:
- An individual Canadian citizen or permanent resident of Canada
- A publicly traded Canadian corporation
- A person with title to the property in their capacity as trustees of various widely held trusts
- A registered charity
- A cooperative housing corporation
- A municipal organization or other public institutions and government bodies.
All other residential property owners are required to file an annual return and pay UHT unless they meet an exemption from the tax. However, even if no tax is due, any residential property owner on December 31st that is not an excluded owner must file an annual return for each property owned.
Note that Canadian private corporations, partnerships, and trusts that are not excluded owners and may be subject to filing an annual return if they own a residential property.
What are the exemptions from UHT?
Those who are required to file an annual return will not have any tax owing if one of the following exemptions apply to the property owned as of December 31st:
- Primary place of residence
- Qualifying occupancy – Property has been occupied for at least 180 days, made up of one or more periods of at least a month by certain individuals (see the return definitions for details)
- Limited seasonal access
- Disaster or hazardous condition – Property is uninhabitable for at least 60 consecutive days
- Renovation or construction – Property is uninhabitable for at least 120 consecutive days in a calendar year or where construction was not substantially complete by the end of March of the calendar year
- Construction of property for sale – Property was substantially complete after March of the year and offered for sale to the public and not previously occupied
- Year of acquisition
- Upon the death of the owner – for the year of death and the year following death
- Specified Canadian corporation – Property was owned by a Canadian corporation with less than 10% foreign ownership
- Partner of specified Canadian partnership – Where all partners were either excluded owners or specified Canadian corporations
- Trustee of a specified Canadian Trust – All beneficiaries with an interest in the property were either excluded owners or specified Canadian corporations
- Prescribed area – Property is located in a prescribed area, and the owner, spouse or common-law partner resided in the property for at least 28 days in the calendar year
- Prescribed area tool can be found here.
How is the tax calculated?
UHT = 1% x property value x ownership percentage
Property value is the greater of:
- The assessed value for the year for property tax purposes, and
- The most recent sale price during the year
An election is available to use the fair market value of the property (should that be less than the above), but the election must be made by April 30th of the year following the calendar year in question and be supported by a written appraisal.
What are the penalties for not filing or paying UHT?
The penalty for failing to file the annual return can be $5,000 for an individual or $10,000 for owners who are not individuals. Additional penalties and interest can be charged on any tax not paid by April 30th.