Canada - Impending deadline for filing Underused Housing Tax return

Nonresident owners of residential property in Canada have an important deadline looming.

The tax return for the underused housing tax (UHT) must be filed by 31 October 2023 to avoid the imposition of penalties and interest. The Canadian tax authorities announced in March that, while the deadline for filing the UHT return will typically be 30 April for the prior calendar year, it was granting transitional relief in 2023 to give affected owners more time to comply (for prior coverage, see the article in the April 2023 issue of Indirect Tax News).

The UHT imposes a 1% tax on the value of vacant and underused residential property owned by anyone other than a Canadian citizen or permanent resident for immigration purposes (referred to as “excluded owners”) as of 31 December of the calendar year unless eligible for an exemption and requires the filing of a UHT return even if the tax is not owed. Failure to file penalties range from CAD 5,000 for individuals to CAD 10,000 for non-individuals per property.

As an example, a UK individual that owns Canadian residential property on 31 December 2022 valued at CAD 600,000 and fails to file the tax return by 31 October 2023 may owe tax of CAD 6,000, as well as a penalty of CAD 5,000, plus additional interest and penalties.
 

Brian Morcombe
BDO in Canada