Dear Clients and Friends,
As the deadline for 2022 UHT filing fast approaches, below is a high level overview of the UHT and the information that is needed for its filing.
What is it – It is a 1% annual tax on the value of residential real estate that is owned by certain non-Canadian owners (and, in certain circumstances, some Canadian owners) in Canada when the property is considered vacant (or underused). This tax applies on properties owned on or after December 31, 2022.
An owner of residential property that is an excluded owner is not required to file a UHT Return and is not liable to pay the UHT. An excluded owner includes (but is not limited to):
- An individual who is a Canadian citizen or a permanent resident of Canada
- A publicly traded Canadian corporation
- A person with title to the property in their capacity as trustees of various widely held trusts
- A registered charity
- A cooperative housing corporation
- A municipal organization or other public institutions and government bodies.
Exemptions – An owner who is not an excluded owner must file a UHT return but may not be liable to pay the tax if they qualify for an exemption. 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. Below are some of the examples, please note that the list is not exhaustive –
- 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.
- The property was occupied for at least 180 days in the year, made up of one or more periods that are at least one month by:
o A third party under a written rental agreement
o A related person paying fair rent to the owner
o The owner’s spouse or common-law partner in Canada under a work permit
o The owner’s spouse, common-law partner, parent, or child who is a Canadian citizen or permanent resident.
- Where the property is owned by “specified Canadian corporations,” meaning Canadian corporations where less than 10% of the voting shares and equity value are owned by non-Canadian individuals or corporations.
- Where the property is owned by a “specified Canadian partnership,” meaning a partnership each member of which is an excluded owner or a specified Canadian corporation.
- 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.
- 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.
- 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.
Type of properties subject to UHT – It applies to residential properties located in Canada. A residential property includes
- Detached houses (containing up to three dwelling units)
- Semi-detached houses
- Rowhouse units
- Residential condominium units
- Any other similar premises intended to be owned as a separate unit or parcel.
Calculation 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 (such as the Municipal Property Assessment Corporation in Ontario); and (b) the property’s most recent sale price on or before December 31 of the calendar year. Alternatively, a person 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 a written appraisal and provided to the Canada Revenue Agency upon request.
Filing Deadline – April 30th
Penalties – A person 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.
Please do not hesitate to contact us at info@clearhouse.ca or 647-969-7382 if you have any questions. If we are not reached out, we will assume that the residential property is owned by an excluded owner and don’t have to file the UHT return.
Kindest regards,
Your Clearhouse Team