If you own residential rental property in a corporation, through a partnership, by way of a trust or joint venture you need to read this!

Underused Housing Tax Act

(the UHT Act)

On January 1, 2022, the Underused Housing Tax Act (the UHT Act) came into force, which requires certain owners of residential property in Canada to file an annual return to report their ownership and, subject to certain exemptions, pay a 1% tax on the property’s value.  The filing deadline for the 2022 year is April 30, 2023, so residential property owners need to understand their potential filing requirements and liability to pay the UHT.  A separate return must be filed for each property.


An owner who fails to file the UHT Return as required under the UHT Act is subject to a minimum penalty of CA$5,000 if the person is an individual or CA$10,000 in all other cases, and a maximum penalty equal to the total of 5% of the UHT payable plus 3% of the UHT payable for each complete month that the UHT Return is not filed. If the UHT Return for a calendar year is still not filed by December 31 of the following calendar year, then the maximum amount of the penalty is determined as if certain exemptions to the UHT (such as those based on the occupant of the property and the availability of the property) were not available and UHT was otherwise payable. PENALTIES APPLY EVEN IF AN OWNER DOES NOT OWE THE TAX!!  So, if you own a residential property that you rent out or which is not occupied, we advise that you determine firstly if you need to file a UHT return and secondly if there is a UHT liability.  You can contact us for assistance and read more about this new tax below.


Who must file?

Unless a person is an “excluded owner”, the UHT Act requires an owner of one or more residential properties in Canada as of December 31 of a calendar year to file, for each such property, an annual return (the UHT Return). This filing requirement applies even if no UHT is payable due to the availability of an exemption under the UHT Act.

The filing process requires opening a new program account with CRA.  In order to register for the new UHT program account, you will need your business number or Social Insurance Number.  The link below will guide you through the process of setting up the required account with Canada Revenue Agency.

Setup My CRA Account


Unless requested by you, we will not be filing this return on your behalf.  Please contact your Gallo LLP advisor if you have any questions or concerns regarding the UHT and/or would like or assistance filing the UHT return(s) on your behalf.  Fees start at $1,000 per owner and will depend on the number of filings required.

Additional Information

For these purposes, residential properties include, but are not limited to, detached houses, semi-detached houses, rowhouse units and condominium units situated in Canada.  

The owner of a residential property for purposes of the UHT Act is the registered owner of the property rather than the beneficial owner. Therefore, a nominee or bare trustee that holds legal title to a residential property for the benefit of others is required to file the UHT Return.

An excluded owner is not required to file a UHT Return and is not liable to pay the UHT. An excluded owner includes:

  • Canadian citizens (individuals) and permanent residents (except where the property is held by a Canadian individual as a trustee of a trust or as a partner of a partnership), 
  • publicly traded Canadian corporations, 
  • a trustee of a mutual fund trust, real estate investment trust or SIFT trust, 
  • registered charities, universities, hospitals, and 
  • Indigenous governing bodies.

All other owners are required to file the UHT return but may not be liable for paying UHT tax.

Although an owner may need to file a UHT Return under the UHT Act, the same owner may not be liable to pay the UHT due to certain exemptions contained in the UHT Act.  These exemptions may apply depending on the type of owner, the occupant of the property, the availability of the property, or the location and use of the property.

  • In addition to excluded owners, the UHT is not payable by Canadian corporations where less than 10% of the voting shares and equity value are owned by non-Canadian individuals or corporations. 
  • The UHT is also not payable by an owner who owns the property solely in their capacity as a partner of a “specified Canadian partnership,” meaning a partnership each member of which is an excluded owner or a specified Canadian corporation, nor by a person who owns the property as a trustee of a “specified Canadian trust,” meaning a trust under which each beneficiary having a beneficial interest in the residential property is an excluded owner or a specified Canadian corporation.
  • The UHT is also not payable by an individual who died during the calendar year or the previous year (or by their personal representative) or by a person who was a co-owner with a deceased owner.
  • A person does not have to pay UHT in the year ownership of the property was acquired if the person never owned the property in the previous nine calendar years. The person would still need to file a UHT Return in the year of acquisition.
  • The UHT is not payable where the property is the primary place of residence of the individual owner, their spouse or common-law partner, or their child while the child is a student. 
  • It is also not payable where the property is occupied for a period of at least 180 days in the calendar year by an arm’s length individual under a lease, 
  • Or if occupied by a non-arm’s length individual under a lease who pays fair rent, 
  • UHT is not payable by an individual who is the owner or the owner’s spouse or common-law partner who has a Canadian work permit, or a Canadian citizen or permanent resident who is the spouse, common-law partner, parent, or child of the owner.
  • If a non-Canadian individual, together with their non-Canadian spouse or common-law partner, own multiple residential properties, then the UHT may be payable on all such properties except for the one property in respect of which an election is made to designate it as either a primary place of residence or occupied by an individual described above.
  • The UHT is not payable if the property is not suitable for year-round use as a place of residence or where it is seasonably inaccessible because public access is not maintained year-round. It is also not payable where the property is under renovations for a period of at least 120 consecutive days in the calendar year, or where a natural disaster or hazardous condition renders the property uninhabitable for a period of at least 60 consecutive days in the calendar year.
  • In the case of newly constructed properties, the UHT is not payable if construction of the property is not substantially completed before April of the calendar year, or if the property is constructed in the first quarter of the year and it is offered for sale to the public during the year.

The UHT is not payable if the property is located in certain prescribed areas of Canada and is used as a place of residence or lodging by the owner or the owner’s spouse or common-law partner for at least 28 days during the calendar year.

The UHT Return for a calendar year must be filed on or before April 30 of the following year.

The UHT return must include certain information, including 

  • the citizenship of the owner (if the owner is not a Canadian citizen or permanent resident), 
  • the address and type of residential property, 
  • the names and ownership percentages of other co-owners of the property, and 
  • the applicability of any statutory exemptions from the payment of the UHT.

The UHT is calculated at the rate of 1% on the taxable value of the property, which is generally the greater of (a) its value as assessed by a government agency (property taxes); and (b) the property’s most recent sale price on or before December 31 of the calendar year.  An owner also may elect to use the fair market value of the property at any time on or after January 1 of the calendar year and on or before April 30 of the following calendar year. The fair market value must be supported by an appraisal which is to be provided to the Canada Revenue Agency upon their request.

Call Now!