Underused Housing Tax Submitting Obligations
The submitting deadline for the primary yr of the Federal Underused Housing Tax (“UHT”)[1] is quick approaching. Any proprietor of residential property in Canada who just isn’t explicitly outlined as an “excluded proprietor” should file a return by April 30, 2023 for every residential property of the proprietor. The UHT is a 1% tax on the worth of vacant or underused residential property straight or not directly owned by non-permanent residents or non-Canadians. Simply since you don’t have any tax to pay, doesn’t imply you don’t have a submitting obligation.
Any proprietor of residential property in Canada should file a UHT return for every residential property that they personal on the finish of the calendar yr until they’re an “excluded proprietor” as outlined beneath the Federal Underused Housing Tax Act (the “Act”).
Below the Act, “excluded house owners” embrace:
- Canadian residents and everlasting residents that personal residential property in Canada apart from of their capability as a trustee of a belief or associate of a partnership;
- Canadian firms whose shares are listed on a chosen inventory change;
- Registered charities;
- Cooperative housing firms; and
- Indigenous governing our bodies or firms wholly owned by such our bodies.
UHT Exemptions and Specified Canadian Firms
A non-excluded proprietor should file a UHT return, however is probably not liable to pay tax in the event that they qualify for an exemption. Exemptions beneath the Act are based mostly on the occupant, proprietor, and the provision, location and use of the residential property.
Canadian firms whose shares aren’t listed on a Canadian inventory change aren’t thought of an “excluded” proprietor beneath the Act and subsequently will usually have to file a return. Nevertheless, a Canadian company will probably be exempt be from paying the UHT for residential properties they personal if they’re a “Specified Canadian Company.”
Below the Act, a specified Canadian company is a company included in Canada whose shares aren’t listed on a Canadian inventory change, the place the controlling individuals (those that personal 10% or extra of the overall fairness or voting shares, straight or not directly) are residents or everlasting residents, and firms included in Canada. The necessities differ considerably for companies with out share capital, akin to included societies.
Penalties and Offenses
Penalties set out within the Act are broad in applicability. There are a selection of penalties for failing to file a return, no matter whether or not an individual owes any quantity of UHT. Penalties additionally apply to each person who fails to offer info required beneath the Act.
An individual who fails to file a return is liable to a penalty equal to $5,000 for a person or $10,000 for a company, plus 5% of the tax calculated, and three% of the product of the tax calculated multiplied by the variety of full months from the date on which the return was required to be filed. Additional, each one who fails to offer info required beneath the Act, akin to info required in a UHT return, can also be liable to a penalty of $250 for each such failure.
Along with being responsible for a penalty for failing to file, an individual can also be liable on abstract conviction to a wonderful of between $2,000 and $40,000 or to a time period of imprisonment not exceeding 12 months, or to each. A person who deliberately fails to pay the UHT is responsible of an offence and is liable to extra fines.
Extra Data
For extra info on the UHT and different related taxes, please see our earlier posts by Gareth Williams and Ben Westerterp: Underused and Undepreciated: Taxing Underused Overseas-Owned Residential Property Nationwide and Empty Houses and Combined Incentives: Canada’s New Underused Housing Tax.
In case you have any questions in regards to the UHT and the way it could apply to you, please contact a member of our Tax Group or Actual Property Group.
[1] The Federal Underused Housing Tax Act got here into drive efficient on January 1, 2022 and implements the UHT.
