Changes for 2023 Tax Year

The federal government has proposed several changes to the UHT legislation that could impact the obligations of owners of residential property in Canada. The most significant changes expands those required to file and a reduction in penalties.

Change in who has to file for 2023 year (expansion of excluded owners)

• a specified Canadian trust - essentially a trust where the beneficiaries and trustees are all Canadian Citizens or PRs.
• a specified Canadian partnership - essentially a partnership where the partners are all Canadian Citizens or PRs.
• a specified Canadian corporation - essentialy where the owners of the corporation are Canadian Citizens or PRs.

Changes in penalties

• $1,000 if the person is an individual from $5,000
• $2,000 if the person is not an individual down from $10,000

—- ORIGINAL POST ——-

As of December 31, 2022, a tax of 1% will apply to the value of any residential property that is considered underused and owned by an affected owner.

If you own the property in a clear and direct ownership structure (ie. it is in your name for your use) and are a Canadian citizen or permanent resident, the filing requirement will likely NOT apply to you.

However, if the property is owned in a more indirect way, you may have a filing requirement but may also qualify for an exemption from the tax. We recommend that you review the below and consult with us to determine whether or not this tax applies to you and, if so, how you can take advantage of any potential exemptions.

How do I file and penalties? It is not known at this time the exact method of filing, but CRA has set a deadline of April 30th. . There are significant penalties if you fail to file an Underused Housing Tax 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.

Below is a list of those REQUIRED/AFFECTED OWNERS required to file (list is not exhaustive)

• an individual who is not a Canadian citizen or permanent resident
• an individual who is a Canadian citizen or permanent resident and who owns a residential property as a trustee of a trust (other than as a personal representative of a deceased individual)
• any person – including an individual who is a Canadian citizen or permanent resident – that owns a residential property as a partner of a partnership
• a corporation that is incorporated outside Canada