Further UHT Changes and Relief for Business Owners

Several changes to the UHT have been proposed, most notably removing the requirement for specified Canadian corporations, trusts and partnerships (refer to Appendix A for the definitions of these terms) to file UHT returns for 2023 and beyond.

In the 2023 Fall Economic Statement, the Federal Government has introduced substantial revisions to the Underused Housing Tax (UHT) and its administration thereof. Originally proposed as a tax on the value of vacant or underused residential real estate owned by non-residents of Canada, the UHT has seen several changes and effective delays to the inaugural filing.

When the UHT initially took effect on January 1, 2022, it required corporations, trusts and partnerships that own residential real estate to file a UHT return, even if the UHT would not be payable or applicable. Following several extension dates to its original filing deadline (including an extension that was announced the day prior to the October 31^, 2023, extended filing deadline), the Federal Government has modified the requirement for businesses, trusts and partnerships to file its 2023 UHT return. Note that these changes impact 2023 UHT returns and not 2022 UHT returns.  2022 UHT returns are now due April 30, 2024.

Proposed Changes

• Effective beginning with the 2022 calendar year UHT filing:
  • The minimum failure to file penalty is proposed to be reduced from $5,000 for individuals and $10,000 for non-individuals to $1,000 and $2,000 respectively
  • Unitized or “condominiumized” apartment buildings will no longer be considered residential properties for UHT purposes
• Effective beginning with the 2023 calendar year:
  • Specified Canadian corporations, partners of specified Canadian partnerships and trustees of Canadian trusts will be excluded owners and will not need to file a UHT return
    • A 2022 return (with an effective deadline of April 30, 2024) is still required for these owners
    • A detailed definition of specified is included below but typically requires that the corporation, trust or partnership is at minimum 90% owned by a Canadian citizen or permanent resident
  • An exemption for residential properties used as a place of residence for employees located outside a census metropolitan area
• Effective beginning with the 2024 calendar year:
  • An individual or spousal unit will be limited to a UHT vacation property exemption for only one residential property for a calendar year

These changes are expected to be implemented early in 2024. While Bateman MacKay’s tax department celebrates these changes to lighten the burden placed on taxpayers, the Federal Government took almost three years since the initial announcement of the UHT to simplify the same. If you require assistance with a UHT filing or any other corporate tax, accounting or business advisory issue, reach out to the experts at Bateman MacKay.

APPENDIX A – DEFINITIONS

Specified Corporations, Trusts and Partnership Definitions for UHT Purposes

A specified Canadian corporation is a corporation that is incorporated or continued under the laws of Canada or a province and, on December 31 of the calendar year, is neither of the two following corporations:

• a corporation in respect of which the following persons have ownership or control, directly or indirectly, of shares of the corporation representing 10% or more of the value of the equity in the corporation or carrying 10% or more of the voting rights under all or under some circumstances:
  • an individual who is neither a citizen nor a permanent resident
  • a corporation that is incorporated or continued otherwise than under the laws of Canada or a province
  • any combination of those individuals or corporations
• a corporation without share capital having either of the following:
  • a chairperson or other presiding officer who is neither a citizen nor a permanent resident
  • 10% or more of its directors who are neither citizens nor permanent residents

A specified Canadian trust is a trust whose beneficiaries that have a beneficial interest in a residential property are all, on December 31, excluded owners or specified Canadian corporations.

A specified Canadian partnership is a partnership whose members are all, on December 31, any of the following:

• excluded owners
• individuals who are citizens or permanent residents of Canada and who would be excluded owners if they were not owners of the residential property as partners of a partnership
• specified Canadian corporations

Full details can be found on this CRA website.