Introduction to the Underused Housing Tax

Underused Housing Tax Notice UHTN1

January 2025

This version replaces the one dated May 2023. This notice has been updated to reflect amendments to the Underused Housing Tax Act and its regulations, including changes to the definitions of excluded owner, specified Canadian partnership, and specified Canadian trust, and information about the ownership of residential property in multiple capacities. These amendments received royal assent on June 20, 2024.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Underused Housing Tax Act (UHTA) and its regulations. The information in this publication does not replace the law found in the UHTA and its regulations.

Table of Contents

• Overview
• The underused housing tax
• Conditions for filing a return
  • What is a residential property
    • What is a dwelling unit
    • What is related land
    • What is a residential condominium unit
    • Prescribed property excluded from the definition of residential property
    • Examples of residential properties
    • Examples of buildings that are not residential properties
  • Who is an owner
    • What is a long-term lease
  • Who is an excluded owner
    • Excluded owners for the 2023 and subsequent calendar years
    • Excluded owners for the 2022 calendar year
    • Specified Canadian trusts
    • Specified Canadian partnerships
    • Specified Canadian corporations
  • Who is an affected owner
  • Ownership in multiple capacities (retroactive to January 1, 2022)
• Conditions for paying the underused housing tax
• Important information for Canadian owners of housing
• Keeping records

Overview

The Government of Canada introduced an underused housing tax (UHT) on the ownership of vacant or underused housing in Canada. The Underused Housing Tax Act (UHTA), which governs the UHT, received royal assent on June 9, 2022. The UHT took effect on January 1, 2022.

The underused housing tax

Generally, the UHT is payable by non-resident non-Canadian owners of vacant or underused housing in Canada. The vast majority of Canadian owners of residential property are excluded owners and, therefore, do not have any obligations and liabilities under the UHTA. However, the UHT is payable by certain Canadian owners of housing in limited situations. For more information, refer to the "Important information for Canadian owners of housing" section in this notice.

Starting with the 2022 calendar year and for each following calendar year, owners of housing in Canada have to determine their obligations and liabilities under the UHTA. Some affected owners have to file an annual UHT return and pay the UHT. Other affected owners have to file an annual UHT return but do not have to pay the UHT. Excluded owners do not have to file an annual UHT return or pay the UHT. For more information, refer to the "Who is an affected owner" and "Who is an excluded owner" sections in this notice.

Conditions for filing a return

You have to file a return, Form UHT-2900, Underused Housing Tax Return and Election Form, for each of your properties in Canada for which all of the following conditions are met on December 31 of a calendar year:

• the property is a residential property
• you are an owner of the residential property
• you are not an excluded owner of the residential property

What is a residential property

Generally, residential property is defined under the UHTA as property in Canada (other than prescribed property) that is either of the following:

• a detached house or similar building that contains not more than three dwelling units, along with any appurtenances and the related land
• a semi-detached house, rowhouse unit, residential condominium unit, or other similar premises, along with any common areas, appurtenances, and the related land

What is a dwelling unit

A dwelling unit is a residential unit that contains:

• private kitchen facilities
• a private bath
• a private living area

Generally, a residential unit is a single self-contained set of rooms in a building or part of a building that is distinguished from any other such set of rooms in the building or part and that is characteristic of, and suitable as, a residence.

What is related land

Related land refers to the land that is subjacent or immediately contiguous to a residential building and that is reasonably necessary for the building's use and enjoyment as a place of residence for individuals.

The Canada Revenue Agency (CRA) has guidelines and criteria under the goods and services tax/harmonized sales tax (GST/HST) to determine the amount of land that is reasonably necessary for the use and enjoyment of a residential building as a place of residence for individuals. Similar guidelines and criteria may be used for purposes of the definition of residential property.

Generally, up to a half hectare of land that is subjacent and immediately contiguous to a residential building is considered to be reasonably necessary for the building's use and enjoyment as a place of residence for individuals.

What is a residential condominium unit

The term residential condominium unit is not defined in the UHTA. For UHT purposes, the CRA interprets the term residential condominium unit to mean a bounded space in a building that is (or is intended to be) both of the following:

• designated or described as a separate unit in the building on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and includes any interest in land pertaining to ownership of the unit
• a dwelling unit 

Prescribed property excluded from the definition of residential property

Effective retroactively to the 2022 calendar year, a particular residential condominium unit that is part of a building containing four or more residential condominium units is prescribed property where both of the following conditions are met:

• a person that is the owner of at least 90% of the residential condominium units in the building is the owner of the particular residential condominium unit
• at least 90% of those residential condominium units of which the person is the owner are held by the person for the purpose of providing individuals with continuous occupancy of a residential condominium unit as a place of residence or lodging for a period of at least one month

A prescribed property is not a residential property for UHT purposes.

Examples of residential properties

The following residential buildings, along with any common areas, appurtenances, and related land, are examples of residential properties for purposes of the UHT:

• detached houses
• duplexes and triplexes
• laneway houses and coach houses
• cottages, cabins, and chalets that are not commercial cottages, cabins, and chalets
• semi-detached houses
• residential condominium units that are not prescribed property
•  rowhouse units or townhouses

Examples of buildings that are not residential properties

The following are examples of buildings, premises, and structures that are not residential properties for purposes of the UHT:

• quadruplexes (buildings that have four dwelling units)
• high-rise apartment buildings
• buildings that are primarily (more than 50%) for retail or office use and that contain an apartment
• commercial condominium units
• boarding houses and lodging houses
• commercial cottages, cabins, and chalets (that is, those that are used by the operator of an establishment to provide lodging to several unrelated business or leisure travellers at once in separate cottages, cabins, or chalets)
• hotels, motels, inns, and bed and breakfasts
• floating homes
• mobile homes
• park model trailers
• travel trailers, motor homes, and camping trailers

Note that the examples of hotels, motels, or inns are meant to illustrate buildings that do not fall within the definition of residential property. For example, a hotel, motel, or inn is often a building situated on a single parcel of real or immovable property that does not contain any residential condominium unit. Where this is the case, the hotel, motel, or inn is not residential property for UHT purposes. However, where a building that is operated as a hotel, motel, or inn is made up of residential condominium units, each residential condominium unit would be a separate residential property for UHT purposes.

Similarly, a building that is used as a bed and breakfast is not a residential property for UHT purposes where the building has a similar structure to that of a hotel, motel, or inn. However, most bed and breakfasts are detached houses and are not structured similar to a hotel, motel, or inn. Where this is the case, a bed and breakfast may be a residential property for UHT purposes.

For more information, refer to the "Questions about residential property" section in Underused Housing Tax Notice UHTN15, Questions and Answers About the Underused Housing Tax.

Who is an owner

You are an owner of a residential property if any of the following apply:

• you are identified as an owner of the property in the land registration system where the property is located
• you are considered an owner of the property based on such a land registration system
• you are a life tenant under a life estate in the property
• you are a life lease holder of the property
• you are a lessee that has continuous possession of the land on which the property is situated under a long-term lease

You are not considered an owner of a residential property if you give continuous possession of the land on which the property is situated to either of the following:

• a life lease holder of the property
• a lessee under a long-term lease

What is a long-term lease

Generally, a long-term lease is a lease of land that meets either of the following conditions:

• the lease provides continuous possession of the land for a period of at least 20 years
• the lease contains an option to purchase the land

Who is an excluded owner

Excluded owners are persons that are excluded from the UHT. These persons do not have to file a UHT return and do not have to pay the UHT.

If you are an owner of a residential property in more than one capacity, you must determine whether you are an excluded owner or affected owner separately for each of those ownership capacities. For more information, refer to the "Ownership in multiple capacities" section in this notice. 

Excluded owners for the 2023 and subsequent calendar years

Starting with the 2023 calendar year, you are an excluded owner of a residential property if you are any of the following on December 31 of the calendar year:

• an owner of the residential property as a trustee of any of the following trusts:
  • a specified Canadian trust
  • a mutual fund trust for Canadian income tax purposes
  • a real estate investment trust for Canadian income tax purposes
  • a specified investment flow-through (SIFT) trust for Canadian income tax purposes
• an owner of the residential property as a partner of a specified Canadian partnership
• an owner of the residential property (but neither as a trustee of a trust nor as a partner of a partnership) and you are any of the following:
  • the government of Canada or a province, or an agent of the government of Canada or a province
  • an individual who is a citizen or permanent resident of Canada
  • a specified Canadian corporation
  • a corporation incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
  • a registered charity for Canadian income tax purposes
  • a cooperative housing corporation, hospital authority, municipality, public college, school authority, or university as those terms are defined in subsection 123(1) of the Excise Tax Act (ETA)
  • a para-municipal organization as defined in section 1 of Part VI of Schedule V to the ETA
  • an Indigenous governing body as defined in section 2 of the Department of Indigenous Services Act
  • a corporation incorporated or continued under the laws of Canada or a province having at least 90% of its shares owned or controlled by one, or any combination, of the following:
    • a trust that is a mutual fund trust for Canadian income tax purposes
    • a trust that is a real estate investment trust for Canadian income tax purposes
    • a trust that is a SIFT trust for Canadian income tax purposes
    • a corporation that is incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
• an individual who is a citizen or permanent resident of Canada and an owner of the residential property as a personal representative of a deceased individual

For an explanation of personal representative of a deceased individual, refer to Underused Housing Tax Notice UHTN12, Exemptions for Deceased Individuals and Their Personal Representatives or Co-owners.

Excluded owners for the 2022 calendar year

For the 2022 calendar year, you are an excluded owner of a residential property if you are any of the following on December 31, 2022:

• the government of Canada or a province, or an agent of the government of Canada or a province
• an owner of the residential property as a trustee of any of the following trusts:
  • a mutual fund trust for Canadian income tax purposes
  • a real estate investment trust for Canadian income tax purposes
  • a SIFT trust for Canadian income tax purposes
• an individual who is a citizen or permanent resident of Canada, unless you are an owner of the residential property as either of the following:
  • a trustee of a trust (except if you are the personal representative of a deceased individual, in which case you are an excluded owner of the residential property)
  • a partner of a partnership
• a corporation that is incorporated under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
• a registered charity for Canadian income tax purposes
• a cooperative housing corporation, hospital authority, municipality, public college, school authority, or university as those terms are defined in subsection 123(1) of the ETA
• a para-municipal organization as defined in section 1 of Part VI of Schedule V to the ETA
• an Indigenous governing body as defined in section 2 of the Department of Indigenous Services Act or a corporation wholly owned by such a body

For an explanation of personal representative of a deceased individual, refer to Underused Housing Tax Notice UHTN12.

Specified Canadian trusts

Starting with the 2023 calendar year, you are an excluded owner of a residential property if you are an owner of the residential property in your capacity as a trustee of a specified Canadian trust on December 31 of the calendar year. As an excluded owner of the residential property, you do not have to file a UHT return or pay the UHT for the residential property.

Starting with the 2023 calendar year, a specified Canadian trust means a trust under which each beneficiary having a beneficial interest in the residential property is, on December 31 of the calendar year, any of the following:

• an individual who is a citizen or permanent resident of Canada
• a specified Canadian corporation
• a corporation incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
• a registered charity for Canadian income tax purposes
• a cooperative housing corporation, hospital authority, municipality, public college, school authority, or university as those terms are defined in subsection 123(1) of the ETA
• a para-municipal organization as defined in section 1 of Part VI of Schedule V to the ETA
• an Indigenous governing body as defined in section 2 of the Department of Indigenous Services Act
• the government of Canada or a province, or an agent of the government of Canada or a province
• a corporation incorporated or continued under the laws of Canada or a province having at least 90% of its shares owned or controlled by one, or any combination, of the following:
  • a trust that is a mutual fund trust for Canadian income tax purposes
  • a trust that is a real estate investment trust for Canadian income tax purposes
  • a trust that is a SIFT trust for Canadian income tax purposes
  • a corporation that is incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
• a specified Canadian partnership
• a specified Canadian trust
• a mutual fund trust for Canadian income tax purposes
• a real estate investment trust for Canadian income tax purposes
• a SIFT trust for Canadian income tax purposes

Specified Canadian partnerships

Starting with the 2023 calendar year, you are an excluded owner of a residential property if you are an owner of the residential property in your capacity as a partner of a specified Canadian partnership on December 31 of the calendar year. As an excluded owner of the residential property, you do not have to file a UHT return or pay the UHT for the residential property.

Starting with the 2023 calendar year, a specified Canadian partnership means a partnership where each member of the partnership is, on December 31 of the calendar year, any of the following:

• an individual who is a citizen or permanent resident of Canada
• a specified Canadian corporation
• a corporation incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
• a registered charity for Canadian income tax purposes
• a cooperative housing corporation, hospital authority, municipality, public college, school authority, or university as those terms are defined in subsection 123(1) of the ETA
• a para-municipal organization as defined in section 1 of Part VI of Schedule V to the ETA
• an Indigenous governing body as defined in section 2 of the Department of Indigenous Services Act
• the government of Canada or a province, or an agent of the government of Canada or a province
• a corporation incorporated or continued under the laws of Canada or a province having at least 90% of its shares owned or controlled by one, or any combination, of the following:
  • a trust that is a mutual fund trust for Canadian income tax purposes
  • a trust that is a real estate investment trust for Canadian income tax purposes
  • a trust that is a SIFT trust for Canadian income tax purposes
  • a corporation that is incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
• a specified Canadian partnership
• a specified Canadian trust
• a mutual fund trust for Canadian income tax purposes
• a real estate investment trust for Canadian income tax purposes
• a SIFT trust for Canadian income tax purposes

Specified Canadian corporations

Starting with the 2023 calendar year, you are an excluded owner of a residential property if you are a specified Canadian corporation that owns the residential property neither in its capacity as a trustee of a trust nor as a partner of a partnership on December 31 of the calendar year. As an excluded owner of the residential property, you do not have to file a UHT return or pay the UHT for the residential property.

Starting with the 2022 calendar year, 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

Who is an affected owner

If you are an owner of a residential property in Canada on December 31 of a calendar year and you are not an excluded owner of the residential property on that date, the CRA refers to you as an affected owner of the residential property for the calendar year.

An affected owner of a residential property has to file a UHT return for the residential property for the calendar year. If you are an owner of a residential property in more than one capacity, you must determine whether you are an affected owner or excluded owner separately for each of those ownership capacities. For more information, refer to the "Ownership in multiple capacities" section in this notice.

If you are an affected owner of more than one residential property, you have to file a separate UHT return for each of those residential properties. 

Ownership in multiple capacities (retroactive to January 1, 2022)

Effective retroactively to the 2022 calendar year, if you are an owner of a residential property in more than one capacity, and one of those multiple capacities is as a partner of a partnership or as a trustee of a trust, you are treated as if you are a separate person in respect of each of the following:

• each partnership for which you are an owner of the residential property in your capacity as a partner of a partnership
• each trust for which you are an owner of the residential property in your capacity as a trustee of a trust
• all other capacities in which you are an owner of the residential property

Since you are treated as a separate person for each of those ownership capacities, you must determine separately whether you are an affected owner or excluded owner for each of those ownership capacities. The facts surrounding your identity as an owner and your ownership capacities of the property dictate whether you have to file multiple annual UHT returns for the residential property.

Conditions for paying the underused housing tax

You have to pay the UHT for each of your properties in Canada for which all of the following conditions are met on December 31 of a calendar year:

• the property is a residential property
• you are an owner of the residential property
• you are not an excluded owner of the residential property
• your ownership of the residential property is not exempt from the UHT for the calendar year

In other words, if you are an affected owner of a residential property on December 31 of a calendar year, you have to pay the UHT for the residential property for the calendar year, unless your ownership of the residential property is exempt from the UHT for the calendar year.

Even if your ownership of a residential property is exempt from the UHT for a calendar year, as an affected owner, you still have to file a UHT return for the residential property.

Where certain conditions are met, your ownership of a residential property may be exempt from the UHT if the property is any of the following:

• a vacation property that is located in an eligible area of Canada
• used as a primary place of residence or for qualifying occupancy
• not suitable for year-round use
• seasonally inaccessible
• uninhabitable during the calendar year
• newly constructed
• starting with the 2023 calendar year, an employee accommodation that is located in an eligible area of Canada

Your ownership of a residential property may also be exempt if you are any of the following:

• a new owner
• a deceased individual, or their personal representative or co-owner
• for the 2022 calendar year only, a partner of a specified Canadian partnership, a trustee of a specified Canadian trust, or a specified Canadian corporation

To help you determine if your ownership of a residential property is exempt from the UHT for a calendar year, refer to the various Underused housing tax notices.

Important information for Canadian owners of housing

You have to file a UHT return for a residential property for a calendar year if you meet all of the following conditions:

• you are a Canadian person (including an individual or a corporation)
• you are an owner of the residential property on December 31 of the calendar year
• you are not described in the "Who is an excluded owner" section, in this notice, in respect of the residential property for the applicable calendar year

Whether you have to pay the UHT for the residential property depends on whether your ownership of the residential property is exempt from the UHT for the calendar year. To help you determine if your ownership of a residential property is exempt from the UHT for a calendar year, refer to the various Underused housing tax notices.

Even if your ownership of a residential property is exempt from the UHT for a calendar year, if you are an affected owner, you still have to file a UHT return for the residential property and indicate the applicable exemption in your return.

Note that the terms citizen and permanent resident are defined in the UHTA to have the same meaning as in subsection 2(1) of the Citizenship Act and in subsection 2(1) of the Immigration and Refugee Protection Act, respectively. For example, if you are a citizen under subsection 2(1) of the Citizenship Act on December 31 of a calendar year, you are a citizen of Canada for UHT purposes for the calendar year. This is true even if you are a non-resident for Canadian income tax purposes or if you do not reside in Canada.

If you are uncertain about your obligations and liabilities under the UHTA, you may request a ruling or interpretation about how the UHT applies to your specific situation.

Keeping records

Every affected owner of a residential property must keep records to enable the determination of their obligations and liabilities under the UHTA. Generally, you must keep the records for six years from the end of the year to which they relate.

Further information