2025 Canada Underused Housing Tax – Everything You Need To Know
Here’s what you need to know about the Canada Underused Housing Tax, especially as a non-Resident non-Canadian property owner.
The Canada Underused Housing Tax (UHT) came into effect on Jan 1, 2022, and is primarily aimed at non-resident non-Canadian owners of vacant or “underused” residential properties in Canada. Certain Canadian citizens, permanent residents, and Canadian corporations may also be required to file an annual UHT return.
You may be required to file the UHT return even if you do not need to pay the tax.
If you’re required to file and don’t qualify for an exemption, you may need to pay 1% of your property’s taxable value each year for UHT.
Don’t Ignore Filing If Required: Penalties are Significant!
This guide provides an overview of the Underused Housing Tax (UHT) for property owners.
Is UHT Different from BC’s Speculation Tax and Vancouver’s Empty Homes Tax?
Yes. The UHT is a Canadian federal tax with its own set of rules, filing requirements, and potential exemptions. It operates independently from the provincial BC Speculation and Vacancy Tax and the municipal Vancouver Empty Homes Tax. As a residential property owner, you could have obligations under one, two, or all three taxes depending on your specific situation and property usage.
Who Needs to File a Underused Housing Tax (UHT) Return?
Broadly speaking, if you are neither a Canadian citizen nor permanent resident of Canada, and own a residential property in Canada, you need to file the annual Underused Housing Tax (UHT) return with the Canada Revenue Agency (CRA).
More specifically, the CRA differentiates between Excluded owners and Affected owners to determine filing and payment requirements. Only Affected owners need to file the annual Underused Housing Tax (UHT) return.
A) Excluded owners:
Excluded owners generally DO NOT have to file a UHT return or pay the tax.
This group includes:
– Individual Canadian citizens or permanent residents
– Publicly-traded Canadian corporations
– Registered charities
– Governments, municipalities, universities, colleges, hospitals, Indigenous governing bodies
– Trustees of mutual fund trusts, REITs, or SIFTs
– “Specified” Canadian corporations, partnerships, and trusts (as defined by Canada Revenue Agency (CRA)–generally, Canadian private entities with mostly Canadian ownership/beneficiaries)
B) Affected owners:
Affected owners MUST FILE an annual UHT return with Form UHT-2900) for EACH residential property you owned on December 31st. You are considered an “Affected owner” if you are not an “Excluded owner.”
This group include:
– Individuals who are neither Canadian citizens nor permanent residents
– Canadian citizens or permanent residents who own property through partnership or trust (unless they qualify as a “specified” type or you’re acting as an executor/personal representative of a deceased person).
– Private corporations, including Canadian-controlled private corporations (unless they qualify as a “specified Canadian corporation”).
– Partnerships (unless they qualify as a “specified Canadian partnership”).
– Trusts (unless they qualify as an excluded type).
Does my Corporation, Trust, or Partnership Need to File the Underused Housing Tax (UHT)?
Entities that are “Specified” Canadian corporations, trusts, or partnerships DO NOT need to file an annual UHT return because they are not Affected owners.
The qualifications are:
– Specified Canadian corporations: generally have less than 10 per cent of their votes or equity value owned by foreign individuals or corporations, and do not have a non-resident non-Canadian chairperson or presiding officer
– Specified Canadian trusts: all beneficiaries are Excluded owners or Specified Canadian corporations
– Specified Canadian partnerships: all partners are either Excluded owners, persons who qualify as Excluded owners, or Specified Canadian corporations.
Please refer to the CRA website here for official definitions.
When Do I Need to File the Underused Housing Tax (UHT) Return?
Affected owners must file the UHT return annually by the end of April deadline, for the residential properties they owned as of December 31st of the previous calendar year.
Who Needs to Pay Underused Housing Tax (UHT) and What are the Exemptions?
Even if you must file as an Affected owner, you may not have to pay the UHT if your ownership qualifies for an Exemption for the calendar year. Filing the return is required to claim the Exemption.
Exemptions include:
– Primary Place of Residence: The property is the main home of the owner, their spouse/common-law partner, or their child attending a designated learning institution.
– Qualifying Occupancy: The property is occupied for at least 180 days in the year wit at least one continuous month by qualifying occupants, such as:
– An arm’s-length tenant under a written agreement.
– A family member paying fair rent under a written agreement.
– The owner or their spouse/partner who is in Canada via a work permit.
– The owner’s Canadian citizen/permanent resident spouse, partner, parent, or child.
– Property Unavailable: The property was not suitable for year-round use, seasonally inaccessible, or uninhabitable for extended periods due to disaster (60+ consecutive days) or major renovations (120+ consecutive days).
– New Ownership / Construction: You acquired the property during the year, or it was newly constructed and not substantially completed before April of the year.
– Death of Owner: An exemption applies for the year the owner passed away and the following year.
– Vacation Property: The property is located in an eligible prescribed area of Canada and used by the owner or their spouse/partner for at least 28 days in the year.
How Much is the Underused Housing Tax (UHT)?
For Affected owners who do not qualify for an Exemption, the UHT is 1% of the property’s “Taxable Value” for the calendar year.
Taxable Value is usually the greater of assessed value for property tax purposes and the most recent sale price. Affected owners can also elect to use the fair market value based on a formal appraisal.
What are the Penalties if I Don’t File the UHT Return on Time?
The CRA imposes substantial penalties if Affected Owners fail to file the UHT return on time, even if you owe no tax.
Minimum Penalty for Late Filing:
– $5,000 for individuals
– $10,000 for corporations (or any owner that isn’t an individual)
These minimums apply per failure (per property, per year). Further penalties and interest can also apply if tax is owing.
Key Dates for 2025:
April 30, 2025: Filing due
You must file a separate return for each property you own that requires filing. If a property has multiple Affected owners, each must file their own return.
How do I File the Underused Housing Tax Declaration?
Affected Owners need to file the UHT through the UHT-2900, Underused Housing Tax Return and Election Form.
Additional Resources
The Canada Underused Housing Tax may evolve on a yearly basis. Official information from the Government of Canada can be found here. Also note this tax is separate from the BC Speculation and Vacancy Tax and the City of Vancouver’s Empty Homes Tax. If you have questions about how these taxes may apply to your investment property, contact us at info@birdsnestproperties.ca or 604.260.9955.
*************************
Birds Nest Properties is a boutique rental property management company that specializes in serving owners of condos and houses in and around Vancouver.
Thinking about renting out your property?
Call us 604.260.9955 to learn about how we work.
Disclaimer: This guide provides general information about the federal Underused Housing Tax and is not intended as legal or tax advice. Tax laws and interpretations can change. Property owners should consult the official Canada Revenue Agency (CRA) resources and seek advice from qualified legal and tax professionals to determine their specific UHT obligations.