Exemptions for Uninhabitable Residential Properties

Underused Housing Tax Notice UHTN10

February 2023

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
• Exemption for residential properties that are uninhabitable due to a disaster or hazardous condition
  • What is a disaster
  • What is a hazardous condition
• Exemption for residential properties that are uninhabitable due to a renovation
• Keeping records

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

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.

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: 

• 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

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

• a partner of a specified Canadian partnership, a trustee of a specified Canadian trust, or a specified Canadian corporation
• a new owner
• a deceased individual, or their personal representative or co-owner

For more information about the above exemptions, 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, as an affected owner, you still have to file a return for the residential property using Form UHT-2900, Underused Housing Tax Return and Election Form.

For an explanation of affected owner, dwelling unit, owner and residential property, and to determine whether the underused housing tax applies to you, refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax.

Exemption for residential properties that are uninhabitable due to a disaster or hazardous condition

If you are an affected owner of a residential property on December 31 of a calendar year, your ownership of the residential property is exempt from the underused housing tax for the calendar year if both of the following conditions are met:

• the residential property is uninhabitable for at least 60 consecutive days in the calendar year because of a disaster or hazardous condition caused by circumstances beyond your reasonable control or the reasonable control of any other owner
• this exemption did not apply to the residential property for the same disaster or hazardous condition for more than one previous calendar year

What is a disaster

A disaster is any of the following:

• an earthquake, fire, flood or landslide
• a spill or leakage of oil, gas or another poisonous or dangerous substance
• any other natural disaster or dangerous event

What is a hazardous condition

A hazardous condition is any of the following:

• a structural component of the residential property (such as the roof, foundation, external walls, interior supporting walls, floors or staircases) is defective or damaged
• oil, gas or another poisonous or dangerous substance is present in the residential property
• any other condition relating to the residential property that is hazardous to the health or safety of its occupants

Exemption for residential properties that are uninhabitable due to a renovation

If you are an affected owner of a residential property on December 31 of a calendar year, your ownership of the residential property is exempt from the underused housing tax for the calendar year if all of the following conditions are met:

• a dwelling unit that is part of a residential property is uninhabitable for at least 120 consecutive days in the calendar year because of renovations to the residential property
• the renovations were carried on without unreasonable delay
• this exemption did not apply to the residential property for any of the nine previous calendar years

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.

If you do not have adequate records to support that your ownership of a residential property is exempt from the underused housing tax for a calendar year, the Canada Revenue Agency may disallow your exemption.

Further information