Exemption for Primary Place of Residence

Underused Housing Tax Notice UHTN6

February 2023

The purpose of this notice is to help you determine if your ownership of a residential property qualifies for the exemption for residential properties that are used as a primary place of residence.

If you are an owner of multiple residential properties (or if between you and your spouse or common-law partner you are owners of multiple residential properties), your eligibility for this exemption may be impacted. For more information, refer to Underused Housing Tax Notice UHTN8, Special Rule and Elections for Individual Owners of Multiple Residential Properties.

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

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: 

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

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.

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.

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 used as a primary place of residence

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 a dwelling unit that is part of the residential property is the primary place of residence of any of the following for the calendar year:

Only affected owners who are individuals qualify for this exemption.

If you are an owner of multiple residential properties (or if between you and your spouse or common-law partner you are owners of multiple residential properties), your eligibility for this exemption may be impacted unless you file an election with the Canada Revenue Agency (CRA). For more information, refer to Underused Housing Tax Notice UHTN8, Special Rule and Elections for Individual Owners of Multiple Residential Properties.

What is a primary place of residence

The CRA has guidelines and criteria under the goods and services tax/harmonized sales tax (GST/HST) to determine whether an individual’s residence is their primary place of residence. Similar guidelines and criteria may be used for the underused housing tax.

Generally, if you have more than one place of residence, the place of residence that is first in order of importance to you is your primary place of residence. A place of residence that is not first in order of importance to you is a secondary place of residence. For example, a secondary place of residence may be one that is used mainly for recreational purposes or that is occupied less often than another residence. If you are not a citizen or a permanent resident of Canada and your primary place of residence is outside Canada, any residential property that you own in Canada is generally considered to be a secondary place of residence, unless you can prove otherwise.

Primary place of residence refers to a specific type of place of residence. While there is some similarity to the term principal residence used under the Income Tax Act, the determination of principal residence is not necessarily an indicator of whether a residential property is an individual’s primary place of residence for purposes of the underused housing tax.

Example 1 – primary place of residence of owner

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 Halifax (a rowhouse unit) that they purchased in 2020. The individual is not an owner of any other residential properties in Canada.

The individual also owns a house outside Canada and normally that house is their primary place of residence. However, in late 2021, the individual receives a Canadian work permit that authorizes the individual to work for an employer in Halifax from January 1, 2022, to December 31, 2024. Since the individual is going to be in Canada for three years, they decide to lease out their house outside Canada during that time.

The individual begins living at the property full time in January 2022 when they start working for the Halifax employer. The individual regularly receives mail at the property, pays for utilities and internet services, keeps all of their valuable and most-used personal effects at the property and has a homeowners insurance policy. Since the individual no longer has access to their house outside Canada, they intend to use the Halifax property as their primary place of residence until they complete the work assignment at the end of 2024.

The individual has to file a return for the property for the 2022 calendar year by April 30, 2023. The individual does not have to pay the underused housing tax for their 100% ownership percentage of the property for the 2022 calendar year because the property is the primary place of residence of an individual who is an owner for that calendar year.

What is a designated learning institution

For purposes of this exemption, a child pursuing authorized study must be accepted at a designated learning institution in Canada. Go to the Designated learning institutions list for post-secondary schools that are designated in Canada. All primary and secondary schools in Canada are automatically designated learning institutions.

Example 2 – primary place of residence of owner’s child

Two individuals are spouses. They are not citizens or permanent residents of Canada and their primary place of residence is outside Canada.

The individuals jointly purchased a property in Canada (a residential condominium unit) in 2019. Each individual is identified in the land registration system as having 50% ownership of the property. Neither individual is an owner of any other residential properties in Canada.

The individuals’ child, who is also not a citizen or permanent resident of Canada, has lived at the property full time since September 2019 when the child started studying under a study permit at a Canadian university that is a designated learning institution. The child regularly receives mail at the property, pays for utilities and internet services and keeps all of their valuable and most-used personal effects at the property. Although the child returns to their parents’ home outside Canada once a year for a short visit, they intend to continue using the property as their primary place of residence until they graduate in 2023. No one else occupies the property when the child visits their parents outside Canada.

The individuals each have to file a separate return for the property for the 2022 calendar year by April 30, 2023. Neither of them has to pay the underused housing tax for their respective 50% ownership percentage of the property for the 2022 calendar year because the property is the primary place of residence of an owner’s child who occupies the property while pursuing authorized study at a designated learning institution.

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 CRA may disallow your exemption.

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.

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: