Calculating the Underused Housing Tax Payable
Underused Housing Tax Notice UHTN2
January 2023
The purpose of this notice is to help you determine how to calculate the underused housing tax payable 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.
Reminder
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.
For an explanation of affected owner, 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.
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.
How to calculate the tax payable
The tax rate of the underused housing tax is 1%. Generally, to calculate the underused housing tax 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.
As explained below, the value of the residential property is either the taxable value or the fair market value.
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 the only owner of the residential property, your ownership percentage of the residential property is 100%
- if you are one of several owners of the residential property, your ownership percentage of the residential property is either of the following:
- the percentage of your ownership as indicated in the land registration system
- 100% divided by the number of owners, if no percentage is indicated in the land registration system
Calculating the 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 underused housing tax 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.
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 the 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.
To determine the taxable value of the residential property for a calendar year for purposes of the underused housing tax, use the full assessed value as established by an authority and as stated in the property assessment notice (or similar document).
Example
An individual is not a citizen or permanent resident of Canada. The individual is the only person identified in the land registration system as an owner of a property in Canada (a detached house) that they purchased for $500,000 in 2019. It is the only property that the individual owns in Canada and their ownership of the property is not exempt from the underused housing tax.
In 2022, the individual receives a property assessment notice from an authority that establishes the assessed value of property for purposes of calculating the municipal property tax. The notice states that the assessed value of the property for 2022 is $600,000.
As an affected owner of the property, the individual has to file a return for the property for the 2022 calendar year. They also have to pay the underused housing tax for their ownership percentage of the property for the 2022 calendar year because their ownership of the property is not exempt from the tax for the calendar year.
To calculate the underused housing tax payable, the individual determines that the taxable value of the property is $600,000 (which is the greater of the assessed value of $600,000 and the property’s most recent sale price of $500,000). Also, the individual determines that their ownership percentage is 100% because they are the only owner of the property.
The underused housing tax payable by the individual for the 2022 calendar year is $6,000 (1% × $600,000 [taxable value] × 100% [ownership percentage]).
Calculating the 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 underused housing tax payable for the residential property for the calendar year.
What is fair market value
The Canada Revenue Agency (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 underused housing tax 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 underused housing tax payable for the residential property for a calendar year, you have to file an election with the CRA. 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, but the election has to be filed with the CRA by April 30 of the following calendar year.
When the due date for an election falls on a Saturday, Sunday or a public holiday recognized by the CRA, the election is on time if the CRA receives it on the next business day. Since April 30, 2023, falls on a Sunday, your election is on time if the CRA receives it on May 1, 2023.
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 underused housing tax 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.
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, Underused Housing Tax Return and Election Form.
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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