Underused Housing Tax – Recommendations to the federal government
While the Canada Revenue Agency’s (CRA) announcement of an administrative extension for Underused Housing Tax (UHT) returns and payments for the 2022 calendar year was welcome, we know many members are still concerned about the impact of the UHT on Canadian owners.
When the UHT was first announced as part of the 2021 federal budget, the budget papers indicated that only non-resident, non-Canadians would be affected by the UHT. However, the scope of the UHT is much broader, and impacts many Canadians, as a result of the legislative approach taken by the federal government.
We recently submitted a letter to the Deputy Minster of Finance and shared it with senior officials at Finance Canada and the CRA to highlight concerns on the scope of the UHT and its impact to Canadian owners. In our letter, we noted the following
- A UHT return must be filed for purely Canadian ownership scenarios involving Canadian corporations, trusts and partnerships. We believe these will be more common than the federal government may have anticipated and highlighted some common Canadian residential property ownership scenarios that would be impacted by the UHT legislation.
- Although the UHT will not be payable in the vast majority of these purely Canadian ownership scenarios as they are exempt as specified Canadian corporations, partnerships or trusts, a penalty of at least $5,000 may apply if the owner does not file the return and indicate they are exempt.
- A separate UHT return must be filed for each residential property owned by an affective owner, which in some circumstances, could result in hundreds or thousands of returns being filed by the same owner.
- An annual return will be required to be completed and filed each year even though the return will often not include any new information.
In our letter, we urged the government to re-examine the impact of the UHT on residential properties owned by Canadians through corporations, trust and partnerships and specifically recommended that the UHT legislation be revised such that specified Canadian corporations, specified Canadian partnerships and specified Canadian trusts are excluded from the UHT reporting requirements. If this is not possible, we recommended the government examine whether the information required on the UHT return for Canadian corporations, partnerships and trusts can be gathered and reported more efficiently.
We plan on following up our letter with discussions with officials at Finance Canada and the CRA. We will keep you updated on relevant developments.