Bill C-8 received Royal Assent last year. The bill included the Underused Housing Tax Act, also known as the UHTA, a tax that is retroactive back to January 1, 2022.
The federal government’s objective with the UHTA is to curb real estate speculation by implementing a national one percent annual tax on the value of residential real estate owned by any non-resident, non-Canadian that is considered vacant or underused.
The underused housing tax is imposed on every person who, on December 31 of a calendar year, is an owner, other than an “excluded owner” of a residential property. Excluded owners include Canadian citizens and permanent residents of Canada, Corporations listed on a Canadian stock exchange, registered charities, Indigenous governing bodies and educational institutions.
While the tax usually applies to non-resident, non-Canadian owners, Millards is warning that in some situations, it can also apply to Canadian property owners.
Millards Chartered Professional Accountants
Joshua Laporte, CPA, CA & Partner from Millards Chartered Professional Accountants says that the new tax achieves its intended purpose but there are scenarios where Canadian property owners could be impacted due to the “unintended consequences” of this bill.
“One area of concern that we have identified is where property is held by a private Canadian corporation that may be underused due to the nature of its use, such as residential properties for seasonal workers or residential rental properties for short stays like Airbnb and Vrbo.”
Laporte is also cautioning farming businesses that may not fully understand their obligation to UHT.
“Farm corporations and farm partnerships across this country may have an obligation to file a UHT return, even if they owe no UHT. Non-filing can result in substantial financial penalties.”
Affected owners of residential property are required to file an annual return by April 30th of the following calendar year. Failure to file a return by the deadline could result in a penalty of at least $5,000 for individuals and $10,000 for organizations, regardless of whether there is UHT tax owing.
Laporte is encouraging all Millards clients and Canadian property owners to download and review the Millards Underused Housing Tax Summary. The summary includes more details as well as a list of excluded owners.
“If you directly or indirectly own a residential property that was underused in 2022, it would be a good idea to contact a tax professional to better understand your exposure to the UHT and possible filing requirements.”
For questions about navigating the new UHT or any other tax or financial challenge, please contact a Millards location. We have offices in Brantford, Simcoe, Hagersville and Port Dover to serve you.
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