Introduction to the Underused Housing Tax

Underused Housing Tax Notice UHTN1

May 2023

This version replaces the one dated January 2023. This notice has been updated to clarify situations where a bed and breakfast may not be a residential property for purposes of the underused housing tax.

The purpose of this notice is to help you determine if you have to file a return and pay the underused housing tax for your residential property for a calendar year.

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

The underused housing tax

Generally, the underused housing tax 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 underused housing tax 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 return and pay the underused housing tax. Other affected owners have to file an annual return but not pay the underused housing tax. Excluded owners do not have to file an annual return or pay the underused housing tax. For more information, refer to the Who is an affected owner and Who is an excluded owner sections in this notice.

There are significant penalties if you fail to file an annual return when it is due. Affected owners who are individuals are subject to a minimum penalty of $5,000. Affected owners that are corporations are subject to a minimum penalty of $10,000. For more information, refer to Underused Housing Tax Notice UHTN3, Filing a Return and Paying the Underused Housing Tax.

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:

What is a residential property

The underused housing tax applies to residential property in Canada. Generally, residential property is defined as property that is either of the following:

What is a dwelling unit

A dwelling unit is a residential unit that contains:

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.

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 underused housing tax:

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 underused housing tax:

Note that a bed and breakfast is not a residential property for purposes of the underused housing tax where the building was purposely constructed or converted to provide sleeping or lodging accommodation on a transient or intermittent basis to several unrelated persons at once in separate rooms (that is, similar to the structure 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 purposes of the underused housing tax. For more information, refer to Question 1.27 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 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:

What is a long-term lease

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

Who is an excluded owner

Excluded owners are Canadian persons that are excluded from the tax. These persons do not have to file a return or pay the underused housing tax.

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

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.

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.

All affected owners of residential property have to file an annual return.

Although the vast majority of Canadian owners of residential property are excluded owners, there are situations where some Canadian owners of residential property are affected owners and, therefore, have to file an annual return. Those situations are included in the examples below.

Examples of affected owners

The following are examples of individuals who are affected owners of residential property and, therefore, are persons that have to file an annual return:

The following are examples of persons (other than individuals) that may be affected owners of residential property and, therefore, may be persons that have to file an annual return:

If you are a corporation mentioned above, be sure to check whether your corporation may be excluded elsewhere in the list of excluded owners.

In this notice, any capacity means that a person is an owner of residential property in Canada in any of the following capacities:

Conditions for paying the underused housing tax

You have to pay the underused housing tax for each of your properties in Canada for which all of the following conditions are met on December 31 of a 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 underused housing tax for the residential property for the calendar year, unless your ownership of the residential property is exempt from the tax for the calendar year.

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

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

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

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

Important information for Canadian owners of housing

If you are a Canadian person described in the Examples of affected owners section above, you have to file an annual return for the residential property. Whether you have to pay the underused housing tax for the residential property depends on whether your ownership of the residential property is exempt from the tax for a calendar year.

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

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

If you are uncertain about your obligations and liabilities under the UHTA, you may request a ruling or interpretation about how the tax 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

For all technical publications related to the UHTA, go to Underused housing tax technical information.

For general enquiries about the underused housing tax, call the applicable telephone number:

  • if you are calling about a residential property that is owned by an individual and you are calling from:
    • within Canada or the United States, call 1‑800‑959‑8281
    • outside Canada and the United States, call 613‑940‑8495 (collect calls accepted)
  • if you are calling about a residential property that is owned by a corporation and you are calling from:
    • within Canada or the United States, call 1‑800‑959‑5525
    • outside Canada and the United States, call 613‑940‑8497 (collect calls accepted)

To request a ruling or an interpretation related to the application of the underused housing tax, write to:

GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville Tower A 5th floor
320 Queen St
Ottawa ON  K1A 0L5
Canada

Fax: 1‑418‑566‑0319

Refer to GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, which explains the rulings and interpretations service offered by the Canada Revenue Agency.

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