Calculating the Underused Housing Tax Payable

Underused Housing Tax Notice UHTN2

April 2025

This version replaces the one dated January 2023. This notice has been updated to reflect amendments to the Underused Housing Tax Act and its regulations, including changes to the definition of ownership percentage 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
• Reminder
• How to calculate the underused housing tax payable
  • What is your ownership percentage
    • Alternative rule for owners in multiple capacities
  • Calculating the underused housing tax payable using the taxable value – the general rule
    • Assessed value established by an authority
  • Calculating the underused housing tax payable using the fair market value – election required
    • What is fair market value
    • Electing to use fair market value
    • How to file the election
• 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.

Reminder

If you are an affected owner of a residential property on December 31 of a calendar year, you have to file a return, Form UHT-2900, Underused Housing Tax Return and Election Form, for the residential property for the calendar year. You also 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.

It is possible for an owner to own a property in multiple capacities. For example, a person could own a property as an individual in their own right and as a trustee of a trust. Each of those is a separate capacity potentially requiring the filing of separate UHT returns.

For general information on the UHT, including an explanation of affected owner, excluded owner, owner, ownership in multiple capacities, and residential property, and to determine whether the UHT applies to you, refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax.

For more information on filing a return, refer to Underused Housing Tax Notice UHTN3, Filing a Return and Paying the Underused Housing Tax.

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. 

How to calculate the underused housing tax payable

If your ownership of a residential property does not qualify for an exemption, you have to calculate and pay the UHT for your ownership of the property.

The tax rate of the UHT is 1%. Generally, to calculate the UHT payable, each affected owner of a residential property has to apply the 1% tax rate to the value of the residential property and then apply their respective ownership percentage of the residential property. The value of the residential property is either the taxable value or the fair market value.

As noted above, it is possible for an owner to own a property in multiple capacities. When calculating the UHT payable, such an owner has to factor in the ownership percentage for each capacity.

What is your ownership percentage

If you are an affected owner of a residential property on December 31 of a calendar year, your ownership percentage of the residential property for the calendar year is determined as follows:

• If you are an owner of the residential property in a single capacity and the land registration system indicates you hold a particular percentage of ownership of the residential property, use that percentage.
• If you are an owner of the residential property in more than one capacity and the land registration system separately indicates a percentage of ownership for each of your ownership capacities, use the percentage indicated for the applicable ownership capacity.
• If the land registration system indicates a group of persons that holds a percentage of ownership of the residential property, and you are part of that group, divide that percentage by the number of persons in the group.
• If none of the above apply, use the percentage obtained by the following formula:

(100% – A) ÷ B

Alternative rule for owners in multiple capacities

If you are an owner of a residential property in multiple capacities and the land registration system does not separately indicate a percentage of ownership for each of your ownership capacities, you may also determine and use a percentage that reasonably reflects your percentage of ownership for the applicable ownership capacity.

It is your responsibility to maintain adequate records to support your determination. If you do not have adequate records to support your determination, the Canada Revenue Agency (CRA) may determine your ownership percentage using one of the aforementioned rules applicable to the situation. For more information on ownership in multiple capacities, refer to Underused Housing Tax Notice UHTN1.

Calculating the underused housing tax payable using the taxable value – the general rule

If you are an affected owner of a residential property on December 31 of a calendar year, the general rule for calculating your UHT payable for the residential property for the calendar year is to multiply 1% by the taxable value of the property and then multiply that result by your ownership percentage of the property for each applicable capacity in which you own the property.

The taxable value of the residential property for a calendar year is the greater of the following amounts:

• the value of the residential property established by an authority that has the power to establish the assessed value of property for purposes of calculating a property tax
• the residential property's most recent sale price on or before December 31 of the calendar year

Assessed value established by an authority

Provincial or territorial assessment and property tax regimes vary across Canada. Under a typical assessment and property tax regime, an authority establishes the assessed value of residential properties in its jurisdiction and sends property assessment notices (or similar documents) to the owners. The authority also sends the assessed value of the residential properties to the applicable municipality. The municipality calculates the property tax for residential properties by applying municipal tax rates to all (or part of) the assessed value of the residential properties and then sends property tax bills to the owners.

A property assessment notice (or similar document) and a property tax bill are generally two separate and distinct documents. However, in some parts of Canada, the property assessment notice and the property tax bill may form one single document.

The assessed value of a residential property, as established by the authority, may not necessarily be the same as the value used by the municipality to calculate the property tax. In some parts of Canada, the property tax may be calculated on only part of the assessed value established by the authority. 

Calculating the underused housing tax payable using the fair market value – election required

If you are an affected owner of a residential property on December 31 of a calendar year, you may elect to use the fair market value of the residential property instead of its taxable value to calculate your UHT payable for the residential property for the calendar year.

What is fair market value

The CRA has guidelines and criteria under the goods and services tax/harmonized sales tax (GST/HST) to determine the fair market value of real property. Similar guidelines and criteria may be used for purposes of the election to calculate the UHT payable using the fair market value of a residential property.

Generally, fair market value is the highest price, expressed in terms of money or money's worth, obtainable in an open and unrestricted market between knowledgeable, informed, and prudent parties that are acting at arm's length, neither party being under any compulsion to transact.

Electing to use fair market value

If you want to use the fair market value of a residential property to calculate your UHT payable for the residential property for a calendar year, you have to do both of the following by April 30 of the following calendar year:

• file an election with the CRA
• obtain a written appraisal determined by an accredited, professional real estate appraiser operating at arm's length (the intended use of the written appraisal must be to help in the administration of the UHTA)

You may determine the fair market value of the residential property at any time on or after January 1 of the calendar year and on or before April 30 of the following calendar year. For more information on the Acceptable Professional Associations and Designations for purposes of the fair market value election, and for more information on how to file the election, refer to "Part 7 - Fair market value (FMV) election" of How to complete the return and calculate the tax.

Generally, the election cannot be revoked or amended during a calendar year once it is validly made for the calendar year.

If you are an affected owner of a residential property on December 31 of a calendar year and you file an election with the CRA to use the fair market value of the residential property, your UHT payable for the residential property for the calendar year is calculated by multiplying 1% by the fair market value of the property and then multiplying that result by your ownership percentage of the property for each applicable capacity in which you own the property.

How to file the election

You may make the election for a residential property in your return filed for the residential property using Form UHT-2900.

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