April 11, 2023
We previously summarized the UHTA on February 15, 2023. Our analysis is located on our website at this link.
The filing obligation relates to Owners of Residential Properties other than Excluded owners (generally Canadian individuals). The deadline for filing an Underused Housing Tax (“UHT”) return for the 2022 calendar year is May 1, 2023 (now effectively postponed as explained below). There are severe penalties for non-compliance.
We communicated situations that resulted in onerous compliance obligations to CRA Rulings and the BILD Association’s advocacy department. Fortunately, the CRA has responded to taxpayer/advisor feedback with some easing of compliance.
1) Postponement of Penalties and Interest to October 31, 2023
UHT penalties and interest for the 2022 calendar year will be waived for late-filed returns and for late-paid tax, provided the return/tax is filed/paid by October 31, 2023. Practically, this postpones the filing deadline until October 31, 2023 for most UHT returns. (Technically any returns requiring special elections must file by May 1 to have the elections considered valid, subject to further CRA announcements.)
2) Easing of the Definition of Residential Property and Assessed Value Reporting
In a technical interpretation to the Canadian Home Builders Association (interpretation letter from CRA to CHBA), dated March 10, 2023 the CRA outlined the following:
- The CRA considers a property as a Residential Property for UHT purposes if it is “substantially completed” (generally 90% or more) at December 31st of the prior year, such that it can be reasonably inhabited by an individual at that time.
- This means that a builder/owner is not required to file a UHT return for a Residential Property that is not “substantially completed” on December 31 of the prior year.
- Each unit of a condominium complex (including those not yet registered) would be regarded as “Residential Property” for UHT purposes. However, under this policy, there would be no filing requirements for units that are not substantially complete by December 31 of the prior year.
- The property’s assessed value and recent sale value do not have to be reported on a UHT return (“$0” can be entered on lines 280 and 285) if:
- No tax is payable in respect of the property due to an available exemption; and
- The UHT return is filed by December 31 of the following calendar year.
3) Application of UHT to Partners/Partnerships
The Department released Notice 15 that outlines questions and answers related to the meaning of Persons and Partnerships for UHT purposes. Here is a link to the Notice.