Important Tax News - Do You Own a Residence in Canada?

22 Mar Important Tax News - Do You Own a Residence in Canada?

The federal budget in 2021 announced that a national annual 1% tax will apply on the value of non-resident, non-Canadian owned residential real estate that is considered to be vacant or underused. This is known as the Underused Housing Tax (“UHT”). This came into effect as of January 1st, 2022.

Even if you live in the property for part of the year, you are required to file an income tax return for each property that you own, even if you are exempt from owing UHT taxes. Failure to do so could result in heavy fines.

Who is affected by this?

Every homeowner that is NOT an excluded owner that owns a residential property on December 31st of the calendar year, is required to file an annual declaration with CRA, for each residential property that they own.

Also, private corporations, partner of a partnership (individual or
corporate partner) and Trustee of a Trust that own residential properties on December 31 are NOT excluded owners so they will have to file a declaration.

Excluded owners

In general, excluded owners are individuals who are a Canadian citizen or permanent resident of Canada.

It is important to note that excluded individuals is not a test on whether the individual is a resident or non-resident of Canada for income tax purposes.

Filing and payment Due date

The declaration and UHT are due on April 30th of the subsequent year. For example, the first year of filing will be April 30th, 2023.

Penalties

Greater of
1) $5,000 for individual; $10,000 if not an individual
2) The total of

a. 5% of the tax for the calendar year
b. 3% of the tax for each complete calendar month the return is late

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to read the full article from Segal GCSE LLP and to learn more!