The Underused Housing Tax (UHT) was implemented in Canada to discourage foreign ownership of vacant residential properties. Let’s delve deeper into the details of this tax.
What is the UHT?
The Underused Housing Tax is an annual tax that applies to the value of the residential property that is vacant or underused. It is determined at 1% of the property’s estimated value on December 31 of every extended period of possession. The UHT Act was enacted on June 9, 2022, as part of Budget 2021.
What properties are subject to the UHT?
A home’s components, including the land, any outbuildings, and the owner’s primary residence, must pay UHT. This includes a single-family home or similar construction with no more than three bedrooms. Commercial properties, rental properties, and properties with more than three dwelling units are not subject to the UHT.
Who is targeted by the UHT?
The UHT mainly targets foreign property owners who own vacant or underused residential properties in Canada. However, it can also apply to certain Canadian owners in specific situations. The tax applies to private properties incorporating detached houses and comparative structures containing not more than three dwelling units.
When does the UHT take effect?
The UHT was enacted on June 9, 2022, with effect from January 1, 2022, as part of Budget 2021. It is an annual tax calculated on the property’s value on December 31 of each year of ownership.
Why was the UHT implemented?
The UHT aims to discourage foreign ownership of vacant residential properties in Canada. The government of Canada implemented this tax to prevent foreign investors from buying properties in Canada and leaving them vacant. This tax is expected to free up the housing market for local buyers and prevent the formation of ghost towns.
What are the exemptions?
Various exemptions apply to limit the application of the UHT. For example, the tax has no significant bearing if the land owner can show that it was empty for under a half year. In addition, if the property is undergoing maintenance or refurbishment and cannot be occupied during that time, the tax might not be applicable.
Impacted proprietors are expected to record a UHT get back with the Canada Income Office (CRA) every year. The inability to record a return can bring about punishments and interest charges.
How is UHT paid?
The Canada Revenue Agency (CRA) requires UHT return submissions from owners of residential properties every year. Every time of ownership, 1% of the property’s estimation as of December 31 is utilized to compute the tax paid to the CRA.
Final Thoughts
The UHT is a new tax to address concerns over foreign ownership of vacant real estate in Canada. The tax applies to non-resident, non-Canadian property owners who leave their properties vacant or underused for extended periods, and it may also apply to certain Canadian owners.
While the UHT has confronted some analysis, it is not yet clear whether it will accomplish its planned objectives of empowering unfamiliar proprietors to one or the other lease their properties or offer them to Canadian purchasers.