Summary of Underused Housing Tax Act

February 15, 2023

Dear Clients,

In June 2022, the Federal Government passed the Underused Housing Tax Act. This Act is aimed at taxing unused residential properties owned directly or indirectly by noncitizens that are not permanent residents of Canada. The legislation is complex and includes severe penalties for noncompliance. The Canada Revenue Agency website and forms have recently been created and are referenced further below.

Many Canadian legal entities will have filing obligations under this Act, for each Residential Property owned, even if there is no tax owing. The Underused Housing Tax Return is due to be filed by April 30th each year for the prior calendar year. The first applicable tax year is 2022. The return is due May 1, 2023, because the due date falls on a weekend.

Filing Requirements

There is no filing requirement for those that meet the definition of an Excluded Owner of a Residential Property on December 31 of the particular calendar year. As discussed below, individual Owners that are Canadian citizens/permanent residents do not have a filing requirement.

An Owner is generally determined in accordance with the land registry system. Accordingly, a “bare trust” title holder meets the definition of Owner.  Owners also include life tenants, life-lease holders and long-term lease holders. A long-term lease is generally defined to be one that is for a period of at least twenty years or with an option to purchase the land.


Every person that fails to file a return, even if no tax is owing, is liable for a penalty equal to the greater of:

  • $5,000 for individuals (i.e. non-citizen non-residents) or $10,000 for persons other than individuals and
  • 5% of the tax calculated plus [3% of the tax calculated times the number of complete months from the time the return was due to be filed]. If an Owner does not file by December 31st of the following year, then the penalty is calculated without certain tax exemptions, possibly increasing the penalty.

Tax Liability and Exemptions

Calculation of Tax

The annual tax is applied at 1% of the taxable value of the property. The taxable value is generally determined as the greater of the amount per the property tax assessment and the most recent sale price on or prior to December 31 of the calendar year. There is an election available if the fair market value can be substantiated as lower than the taxable value.


There are many exemptions from the requirement to pay the tax (even though a filing obligation exists) including:

  • Partners of a partnership with all Canadian citizen or resident partners.
  • Canadian corporations with more than 90% of share votes and value owned by Canadian citizens or resident individuals.
  • Trustees of a trust with beneficiaries that are all Canadian citizens or residents, or Canadian corporations with more than 90% of share votes and value owned by Canadian citizens or resident individuals.
  • Primary residence of an individual/spouse/common-in law partner or a child in authorized study.
  • Occupancy more than 180 days in the calendar year subject to certain restrictions.
  • Other factors such as seasonal usability/accessibility, construction, renovation, death, etc.

Key Definitions

If the Owner does not own a Residential Property as defined below, then such an Owner would not have a filing obligation.

A Residential Property is a property located in Canada that is generally:

  • a detached house or similar building containing less than four units (together with land) for use as a residence for individuals, or
  • a part of a building that is a:
    • semi-detached house,
    • rowhouse unit, or
    • residential condo unit

that is or intended to be a separate parcel/division owned apart from any other unit in the building, (together with proportionate common areas and land) for use as a residence for individuals.

Accordingly, owners of high-rise apartment buildings are not owners of Residential Property and do not have a filing obligation.

The CRA website notes that a building that is primarily (more than 50%) for retail or office use and that contains an apartment, is not a Residential Property.

The CRA website also notes that commercial cottages, cabins and chalets, that provide temporary lodging to several unrelated travellers at once (i.e., resort properties), are not intended to be Residential Properties.

CRA Rulings has verbally confirmed that a rental building of condo units meets the definition of Residential Property and owners have a reporting obligation if they are not Excluded Owners as listed below. More specifically, if a corporation owns an entire building of condo units, there would be a separate return required for each unit. 

An Excluded Owner of Residential Property for a calendar year is generally an Owner that is:

  • An individual that is a Canadian citizen or permanent resident (per the Immigration & Refugee Protection Act) including a Canadian citizen/resident that is an Executor of an Estate.
  • A registered charity or
  • Her Majesty, public corporation, trustees of certain public trusts, certain types of municipalities, school and hospital authority, university, indigenous governing body per statute, and persons that might be prescribed by regulation.

An individual who holds property as a partner on behalf of a partnership or as a trustee on behalf of a trust does not qualify as an Excluded Owner.

Closing Comments

Although there are many exemptions from having to pay the tax, there is a filing obligation for each Residential Property owned by anyone other than an Excluded Owner (i.e. generally a Canadian individual). This creates a significant administrative burden for you if applicable, with onerous penalties for non-compliance unless the rules are simplified.

It is important to remember that ownership for these purposes depends on the defined term of Owner that generally refers to ownership per land registry. If you or your business group own Residential Property and  require our assistance in helping you complete your filings, then please contact us as soon as possible.


Further information is available at the following link on the Canada Revenue Agency website:

Corporations must use their business numbers to obtain an Underused Housing Tax (RU) account identifier.

The UHT-2900 Form is available at the following address:


To file electronically a Digital Access Code will need to be obtained in advance. A Business number registered with the RU extension, Social Insurance Number or an Individual Tax number will need to be provided. The digital access code application is at the following link:

We are advised by CRA that after March 14th, taxpayers will be able to electronically file the UHT-2900 return using My Business Account.

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