CRA Extends the Underused Housing Tax Deadline to October 31, 2023

12 October 2023

On 1 January 2022, the Underused Housing Tax Act[1] (the “Act”) came into effect. The Act requires certain owners of residential property in Canada to pay an annual underused housing tax (the “UHT”), equal to 1% of the value of vacant or underused residential property. For the purposes of the UHT, the value of a residential property is generally calculated using its taxable value. To use the fair market value of the property rather than the taxable value, a taxpayer must file an election with the Canada Revenue Agency (“CRA”).[2]

Each owner of a residential property on December 31 of a particular year, other than an “excluded owner”, must file an annual return, regardless of whether any UHT is payable under the Act.[3] An “excluded owner” includes persons who, on December 31 of the relevant calendar year, are:

• Canadian citizens or permanent residents owning residential property personally;
• Corporations incorporated under the laws of Canada or a province whose shares are listed on a Canadian stock exchange;
• Trustees of mutual fund trusts, real estate investment trusts and SIFT trusts;
• Registered charities; and
• Prescribed persons (to date this term is not defined in the Act or regulations).

On 27 March 2023, the CRA announced that it would waive penalties and interest for any late-filed returns and late-paid UHT for the 2022 calendar year, provided that the CRA receives the return or UHT payable by 31 October 2023. The Minster of National Revenue waived the penalties and interest in order to provide transitional relief to affected owners.[4] This effectively extends the filing deadline for 2022 from 30 April 2023 to 31 October 2023.

Every person who fails to file a return before 1 November 2023 will be liable to a minimum penalty equal to the greater of:

1. $5,000 if the person is an individual or $10,000 is the person is not an individual, and
2. the amount that is the total of:
   1. 5% of the UHT payable by the person in respect of the residential property for the calendar year, and
   2. 3% of the UHT payable multiplied by the number of complete months from the date on which the return was required to be filed.[5]

If you have any questions about the above information, please contact a member of Gardiner Roberts LLP’s experienced Tax and Estates Planning Group. A PDF version is available to download here.

[1] Underused Housing Tax Act, S.C. 2022, c. 5, s. 10 [UHTA].

[2] Underused Housing Tax – Canada.ca

[3] UHTA ss. 2.

[4] Underused Housing Tax penalties and interest waived – Canada.ca

[5] UHTA ss. 47(1)

 

(This blog is provided for educational purposes only, and does not necessarily reflect the views of Gardiner Roberts LLP).