Exemption for Primary Place of Residence

Underused Housing Tax Notice UHTN6

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 used as a primary place of residence
  • What is a primary place of residence
  • What is a designated learning institution
• 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 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:

• you or your spouse or common-law partner
• your child, or your spouse’s or common-law partner’s child, who occupies the residential property while pursuing authorized study at a designated learning institution

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.

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.

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