Under the hood of the Underused Housing Tax (UHT)

  • The Underused Housing Tax (UHT) is an annual 1% tax on vacant or underused residential property in Canada owned by non-Canadians
  • The UHT does not apply to commercial property and Canadian citizens who personally own residential property, including vacation homes, are exempt
  • Understanding how your unique situation qualifies and if you need to file is crucial as there are significant penalties for non-compliance

What is the UHT?

In effect since January 1, 2022, the Underused Housing Tax (“UHT”) is an annual federal 1% tax on the ownership of vacant or underused housing in Canada.

While the tax was intended to target vacant or underused residential real estate owned by non-citizens, there are situations where the rules could apply to Canadians – so even if you don’t have to pay the tax you may still be required to file a return to claim your exemption.

As there are significant penalties for non-compliance it’s important to understand who is affected by it, what exemptions are available, when to file, and what the penalties are. You’ll find all the answers to these important questions in the article below.

Does the UHT affect me?

The UHT only applies to owners of residential property, which includes detached homes, semi-detached homes, rowhouse units, townhouses, residential condominium units, laneway and coach houses, cottages, cabins, and chalets that are not for commercial use.

Residential property does not include high-rise apartment buildings, quadruplexes, buildings that are primarily (50% or more) for retail or office use and that contain an apartment, or commercial property of any kind.

Everyone falls into one of three main categories under the UHT: those who are excluded and do not have to file, those who are affected and must file and pay the tax, and those who are affected but exempt and must file to not pay the tax. As such, residential property owners are defined as either “Excluded Owners” or “Affected Owners”.

Excluded Owners include but are not limited to: Canadian citizens or permanent residents, registered charities, and cooperative housing corporations. Canadians who own property directly are considered Excluded Owners and do not have to file.

Affected Owners include, but are not limited to:

  • An individual who is not a Canadian citizen or permanent resident
  • An individual who is a Canadian citizen or permanent resident and who owns a residential property as a trustee of a trust
  • A personal representative of a deceased individual
  • Any person who owns a residential property as a partner of a partnership
  • A private Canadian corporation
  • A corporation that is incorporated outside of Canada
  • A Canadian corporation without share capital


Affected Owners are only required to file a UHT return if they own residential property located in Canada.

What qualifies as exempt under the UHT?

There are exemptions available to Affected Owners which include but is not limited to:

  • The residential property is the primary residence of you, your spouse or common-law partner, or for your child who is attending a designated learning institution
  • A new owner in a calendar year
  • Newly constructed
  • Not suitable to be lived in year-round, or seasonally inaccessible
  • Uninhabitable for a certain number of days because of disasters or hazardous conditions or renovations
  • Vacation properties located in an eligible area of Canada and used by you or your spouse or common-law partner for at least 28 days in the calendar year
  • The residential property is rented for at least 180 days in the calendar year to:
    • a third-party with a written contract
    • a related person with a written contract who pays at least fair value rent
    • your spouse or common-law partner, parent, or child who is a Canadian citizen or resident

If you are an Affected Owner who is exempt from the UHT, you must still file an annual UHT return to claim your exemption. An Affected Owner could be subject to UHT on an exempt property if the UHT return is not completed.

When do I have to file?
The UHT return filing due date is April 30 of the following year. If you file later than December 31, you may be subject to adjusted tax calculation or penalties.

What are the UHT penalties?
Penalties for failing to file a required UHT return when it is due is a minimum of $5,000 for individuals and $10,000 for corporations.

How can I learn more about the UHT?

Understanding how your property ownership qualifies under the UHT as well as how and when to file is critical, and we’re here to help. If you believe the UHT applies to you or would like to confirm that you are an Excluded Owner, please contact our Tax Manager Brad Grsic at 250.370.9178 to discuss your unique situation.

Disclaimer: This article is intended to inform readers in general terms. It is not intended to provide any tax, investment or business advice. Please consult your advisor if you have any questions about your unique situation. While we have tried to ensure the accuracy of the information in this article, we accept no liability for errors or omissions.

HISA ETFs might not be dead yet

OSFI ruling could impact yields, asset managers and advisors weigh in

November 1, 2023

The Office of the Superintendent of Financial Institutions (OSFI) announced yesterday they would be upholding a 100% liquidity requirement for high interest savings account (HISA) ETFs. Citing their core liquidity adequacy principles, OSFI will mandate that as of January 31st 2024 all banks and deposit-taking institutions will need to maintain “sufficient high quality liquid assets.”

Banks had largely maintained a 40% runoff rate on HISA assets before this ruling. By mandating a 100% liquidity requirement it is expected that these ETFs will pay a lower yield.

“We’re extremely disappointed by this ruling,” says Vlad Tasevski, Chief Operating Officer and Head of Product at Purpose Investments, which manages the Purpose High Interest Savings Fund at around $5.6 billion in AUM. “At the same time, I think we expect these offerings to still remain the most attractive option for cash investments, they will still offer a lot of value.”

What OSFI’s decision means now

Even though the new liquidity requirements are expected to impact the yield of these ETFs, Tasevski still views these products as competitive against other money market funds, traditional high interest savings accounts, and other forms of cash allocation. He argues that while the delta on yield between HISA ETFs and other money market funds might shrink, they still offer a greater degree of security from a risk standpoint. He believes that while this ruling may make the competitive landscape between HISA ETFs and other money market products more even, he thinks products like his can still attract assets.

The combination of low operating costs, relative stability, and high yields on cash made HISA ETFs very popular in recent years. According to National Bank Financial cash alternative ETFs like HISA ETFs grew their AUM to over $15 billion in 2022 and added another $6.9 billion so far this year. 

“About half a million Canadians own these funds, and many of them have been relying on the interest payments from these products to fund their ongoing living expenses. The fact that this yield is going to come down is unfortunately going to hurt Canadians,” says Raj Lala President & CEO of Evolve ETFs — which manages the High Interest Savings Account Fund at around $5.3 billion in AUM.

Lala expects that asset managers will now enter into a transitionary period for these products, determining what their rates will look like between now and the 31st of January, as well as what they will look like after. He says that the major asset managers behind HISA ETFs is Canada are working together in meetings with banks and regulators to secure the best outcome for their funds. Nevertheless, he does predict a drop in yield.

Who benefits from the OSFI decision?

Tasevski acknowledges that this decision from OSFI does benefit alternative cash strategies. Money market funds and bank high interest savings accounts may look more attractive to investors if yields on HISA ETFs do come down significantly. Nevertheless he emphasized that funds like his should remain attractive. At least one advisor agrees.

Evan Riddell, Principal and certified financial planner at Ridell private wealth management, part of IG private wealth management, says the decision actually makes HISA ETFs more attractive in his eyes. He has been using these funds for his clients almost since their inception and the Victoria, B.C., based advisor says that for his purposes a 100% liquidity requirement makes them even more useful.

“It’s making sure that these alternatives [to cash] are apples to apples and safe for clients, because clients aren’t using this as a long-term piece. They’re typically using this as a short-term savings vehicle, so making sure they have that 100% liquidity is absolutely paramount,” Riddell says. “The spread still seems to be pretty large, even if we saw these products coming down in yield a little bit as a result of this ruling, I expect the spread to be fairly substantial and in the interests of the client.”

Are alternative cash allocations more attractive?

Kevin Burkett, portfolio manager at Burkett Asset Management, sees the logic behind OSFI’s ruling given the meteoric rise of HISA ETFs among Canadian investors. He wonders, however, why so many Canadians have flocked to these products and argues that it largely comes down to a lack of easily available alternative options.

While headline interest rates have risen, traditional high interest savings accounts have lacked yields attractive enough to bring in capital. He expects, however, that when banks offer more competitive rates to seek deposits, there could be a structural shift away from these HISA ETFs. For his part, Burkett extolls the virtues of T-bills for his cash-like allocations.

“Why are people having to go to HISA ETFs to replicate returns they would get on T-bills issued by the Canadian government?” Burkett asks. “You don’t have to worry about what the underlying pool is invested in…I think what’s really important is that folks look through the ETF and understand what the holdings are because that’s what you’re really buying.”

Lala argues that from an underlying perspective these products remain viable and alternative. He believes that from a yield to liquidity to credit standpoint HISA ETFs like his remain ahead of other cash and cash alternative products.

What can advisors do now?

As advisors look at their HISA ETF allocations in the wake of this decision, Tasevski and Lala believe they should not make any immediate decisions. They argue for a ‘wait and see’ approach as asset managers work with banks to determine what rates on these products might be in future. The 100% liquidity rule won’t come into effect until January 31st of next year, and in the meantime asset managers are exploring all the options available to them.

“Sit tight,” Lala says when asked what advisors should do. “I feel confident that we’ll have some transitionary period for the next couple months were we expect the yield will be somewhere above overnight. On January 31st or February 1st that’s when you can kind of take a look at the yield on these products and compare them to what you can get elsewhere on the market.”