- February 20, 2023
- Posted by: Harpreet
- Category: Tax Tips
ALERT – NEW UHT reporting
There have been several changes introduced in 2022 which will be reflected in the 2022 T1 Organizer that will be sent over in a few weeks. In the meantime, the more imperative change that requires additional reporting and perhaps payment of tax is related to the Underused Housing Tax (UHT). If you meet any of the following, you are impacted:
- You own residential real estate (zoned residential, has specific definition)
- Own a commercial property with residential units
- You are not a Canadian citizen or permanent resident
- You hold the property in trust for your corporation
- You own the property as a partner with someone (could be spouse as well)
This new requirement should not be taken lightly as failure to comply will result in a penalty of $5,000 for individuals and $10,000 for corporations. Filing deadline for this form is April 30, 2023, irrespective of the year-end of your corporation(s). Originally, the goal of UHT was to tax foreign owners who keep properties vacant. Unfortunately, the legislation is poorly written and ropes in tons of unneeded situations. It is important to remember that although you may have a filing requirement, you may not have a tax liability (due to exemptions that are available).
Some general comments for applicability:
– If you own residential property as an individual and are a Canadian citizen or a permanent resident, then this tax does not apply to you (this exclusion does not apply when you own the property as a partner in a partnership or trustee of a trust).
– If you own a property joint with someone else (could be spouse, related individual or unrelated individual), we have to determine whether you own the property as co-owners or partners. Differentiating between the two is difficult but we would have to look at this on a case-by-case basis. This will determine if you have a filing requirement.
– If you own a property in a corporation – you will likely have a filing requirement (tons of details are required). The form that needs to be completed is attached and you will need legal paperwork to support some of the boxes.
– Although you may have a filing requirement, you may not have a tax liability. Once you have determined that you are required to file, you will look for exemptions that you can apply for. These exemptions include:
- Specified Canadian corporation with owners that are owned by 90% Canadian citizens or permanent resident
- New owner
- Death in the year
- Property is under construction and not substantially completed
- Occupy the property as your primary residence
- Certain exemption for vacation property
– The form has to be filed by each owner for each property separately
– If you don’t meet these exemptions, you will have to file and pay the UHT – 1% of greater of property’s tax assessed value for the year and most recent sales price multiplied by your ownership percentage
If you have residential property in corporations and/or are holding them in trust or as partners, you need to start gathering information. We will have to apply for a RU number for each of your corporations that are impacted and hence will need confirmation from you that you have started this process for each property.
Please review the attached forms uht-2900-22e & UHT-QuickReferenceChart-v2.1-01.31.2023 and start getting the legal information ready. You may need to connect with your lawyer to obtain some information or look for the original purchase and sales document. Please email me if you have any questions as I will have to look at the details of your file to confirm filing requirements.