Under the hood of the Underused Housing Tax (UHT)

Tax
01-03-2024

  • 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.



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