UHT Newsletter – Urgent as Deadline to File is Approaching
The Underused Housing Tax (UHT) is an annual 1% tax on the ownership of vacant or underused housing in Canada that took effect on January 1, 2022. The tax was meant to apply to non-resident, non-Canadian owners, but on final drafting of the legislation it was expanded.
A UHT return is a separate filing from a personal, corporate or trust tax returns. In addition, a UHT filing is required for each property. So if you are an owner of 4 residential properties and are required to file, you will have to file 4 UHT returns.
The first UHT filing period is for the calendar year ended December 31, 2022 and the deadline to file was April 30, 2023. However, CRA will waive any penalties and interest provided the return is filed or the tax is paid by October 31, 2023. The penalty for failing to file a return is a minimum of $5,000.
Please follow the steps to below to see if this filing applies to you:
Step 1 – are you a legal owner of a residential property (a property with 3 units or less) in Canada on December 31, 2022?
A legal owner of a residential property is defined as the person registered on title.
If no, this filing does not apply to you.
If yes, continue to step 2.
If you own a mixed use property (part residential and part commercial) and the residential component has 3 units or less and comprise at least 50% of the overall property, then this applies, continue to step 2.
Step 2 – are you an excluded owner? Excluded owners do not have to file.
If you are an individual, who is a Canadian citizen or permanent resident then you do not have to file, unless the next point applies:
If you are an individual, who is a Canadian citizen or permanent resident, and you hold your interest in the property as a partner in a partnership or as a trustee in a trust, then you have to file – continue to step 3. This does not apply to individuals (spouses that own their principal residence, cottage or rental property), but does apply to individuals that are owners of a property in a partnership or joint venture with others.
If you are a public corporation, registered charity, cooperative housing corporation, government agency, you do not have to file.
If you are a Canadian controlled private corporation, you will have to file, continue to step 3.
Step 3 – do you have to pay a tax?
Anyone that has to file is considered an affected owner. Most affected owners of a residential property will not have to pay a tax, as they will meet one of the many exemptions – exemptions for specified Canadian corporations, partnerships and trust; exemption for qualifying occupancy, exemption for vacation properties, exemption for primary place of residence, etc… But as an affected owner you will still have to file a return. Again failure to file will result in a penalty.
How to prepare and file a UHT return
Step 4 – prepare the UHT-2900 Underused Housing Tax Return and Election Form
If you are an individual owner, you will use your SIN
If you are a corporate owner, you will need a UHT account number from CRA. Please call CRA at 1-800-959-5525 and request they open a UHT account; or you can register online using Business Registration Online. Your account should be your business number with RU0001 at the end.
If you are a corporate owner and don’t have a business number, you will have to register for a business number first – you can fill out a RC1 form or register online using Business Registration Online.
You will need the property address, property identification number, assessment roll number and assessed value (or a recent sale price on or before December 31, 2022).
As I anticipate most of the affected owners will be Canadian controlled private corporations that own rental residential properties, I’ve prepared a sample UHT return that you can use as a guide – there are notes inside the sample.
Step 6 – file the UHT return
You can either mail a paper form to CRA or file it electronically
There are two main Tax Centres to send your return. For clients in the Kitchener-Cambridge-Waterloo area, you will mail your return to the Winnipeg Tax Centre.
If you want to file electronically, you will need to get a digital access code.
As always, if you have any specific questions about this tax or how to file the return, please reach out to your accountant. This procedure is meant as a guide and not accounting advice. If you need an accountant, Ark Accounting has provided this great guide and can assist with this return.