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New Underused Housing Tax

The Underused Housing Tax is a 1% annual tax on the value of vacant or underused residential property in Canada owned by foreigners.  This is a new federal tax implemented for the Calendar year 2022.  The purpose of which is to tax residential property owned by foreigners but in some cases could apply to Canadian owners.  If you are an ‘excluded owner’ than you are exempt from filing. 

Criteria for an excluded owner includes:

  • an individual who is a Canadian citizen or permanent resident (Unless an affected owner)
  • any person that owns a residential property as a trustee of a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT) for Canadian tax purposes
  • a Canadian corporation whose shares are listed on a Canadian stock exchange designated for Canadian tax purposes
  • a registered charity for Canadian income tax purposes
  • a cooperative housing corporation for Canadian GST/HST purposes
  • an indigenous governing body or a corporation wholly owned by an indigenous governing body

If you do not meet the above criteria of an excluded owner you MUST file the annual Tax Return and Election Form and pay taxes, if any, owing for each property owned in the calendar year by April 30thof the following calendar year.  Taxes related to the calendar 2022 year are due April 30th, 2023 (deadline falls on the weekend so the 2023 deadline is May 1, 2023). 

Even if you don’t owe taxes, the minimum penalty for not filing for individuals is $5,000 and corporations $10,000 per property.

If you are required to file a return you may be able to claim an exemption from the housing tax.  The main exemptions fall into four categories:

Exempt #1: the type of owner you are

  • specified Canadian corporation
    • partner of a specified Canadian partnership, or trustee of a specified Canadian trust
    • a new owner in the calendar year
    • a deceased owner, or a Co-Owner or personal representative of a deceased owner

Exempt#2:  the availability of the residential property

  • newly constructed
    • not suitable to be lived in year-round, or seasonally inaccessible
    • uninhabitable for a certain number of days because of
      • a disaster or hazardous conditions
      • renovations

Exempt #3: the location and use of the residential property

  • a vacation property located in an eligible area of Canada and used by you or your spouse/common-law partner for at least 28 days in the calendar year Eligible Area Lookup Tool

Exempt #4: the occupant of the residential property

  • it is the primary place of residence for you or your spouse/common-law partner (or a child who is attending a designated learning institution
    • at least 180 days in the calendar year are included in one or more qualifying occupancy periods for your ownership of the residential property

If between you and your spouse/common-law partner you own multiple residential properties, you ownership MAY NOT QUALIFY for the exemptions for either primary residence or qualifying occupancy unless you file an election with the CRA to designate only one property for the purposes of the exemption.

This article is not inclusive of all the rules.  Ensure you review the filing requirements on the CRA website – CRA – Underused Housing Tax.

As the filing deadline is fast approaching and the rules are complex, give Achieve CPAs LLP a call at 604-433-7050 to avoid making any mistakes.

Written by Kate Norris, CPA, CA | Partner at Achieve CPAs LLP

Published March 13, 2023.