Upcoming Alterations to Lesser-Utilized Housing Tax – Compilation of Exemptions

In its most recent Fall Economic Update, the federal government has unveiled several noteworthy adjustments to the relatively new Underused Housing Tax (UHT). Once the proposed amendments gain approval, they are poised to significantly reshape the landscape of mandatory annual UHT returns. Commencing with the reporting year of 2023 and extending into subsequent years, the requirement for filing will be lessened, providing a greater number of taxpayers with an opportunity to qualify for an exemption from the 1% UHT tax based on the property’s assessed value.

Diversifying the pool of individuals and entities exempted from filing, the envisioned changes to the UHT will specifically exclude:

  • Specified Canadian corporations, delineated as those where non-Canadian individuals or corporations hold less than 10% of the voting shares and equity value in the company.
  • Partners of a specified Canadian partnership, a provision applicable when each partner would otherwise be deemed ‘excluded’ from the UHT if they personally held ownership of the property.
  • Trustees of a specified Canadian trust, provided that all beneficiaries of the trust would otherwise meet the criteria for being ‘excluded’ from the UHT, or if the trust is owned by a specified Canadian corporation.

Emphasizing the enduring significance of being a Canadian citizen or permanent resident, this remains one of the most prevalent grounds for ‘exclusion’ from the UHT.

Beyond alterations to exemptions, the preliminary legislation has also introduced a notable reduction in penalties for non-compliance. Individuals who would have faced a previous fine of $5,000 for failure to file will now encounter a diminished penalty of $1,000. Similarly, corporations failing to meet their filing obligations will witness a reduction in fines from the earlier $10,000 to the current $2,000. These amendments apply to filings for the 2022 calendar year.

In tandem with these adjustments, the government has consistently extended the filing deadline for the tax year 2022. Initially set for April 30, 2023, the deadline was later extended to October 31, 2023. Subsequently, on October 31, 2023, it was once again postponed, this time to April 30, 2024. If you have not completed your 2022 UHT filing, there is still an opportunity to do so. However, it is crucial to note that the UHT filing deadline for the 2023 calendar year is currently set for April 30, 2024, at least as of the present moment.

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