Canada’s Underused Housing Tax (UHT) – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Canada’s Underused Housing Tax (UHT) is a new federal tax that has caught many property owners off guard. Although designed primarily to target non-resident, non-Canadian owners of vacant or underused residential properties, the filing requirements extend far beyond foreign owners. Many Canadian citizens, Canadian corporations, partnerships, and trustees must now file a UHT return—even if they owe zero tax—to claim exemptions. Failure to file can trigger penalties starting at $5,000 for individuals and $10,000 for corporations, even when no tax is payable. Understanding the UHT is essential for all residential property owners in Canada.

Legal and Regulatory Framework

The UHT is governed by the Underused Housing Tax Act, effective January 1, 2022. The tax applies at a rate of 1% of the property’s taxable value (usually the assessed value or elective fair market value) on vacant or underused residential property owned on December 31 of each year. Although the policy targets non-resident ownership, the Act requires many Canadian owners—especially those holding property through corporations, partnerships, and trusts—to file an annual UHT return (Form UHT-2900) by April 30 to declare their exemption. Filing obligations apply regardless of income tax filings.

Key Court and Policy Considerations

Because UHT is a new tax, major court cases have not yet emerged, but CRA guidance emphasizes strict compliance. CRA has already warned taxpayers that penalties for not filing are mandatory and not dependent on whether tax is owing. CRA also clarified that a property held through a corporation, partnership, or trust is presumed to be affected unless an exemption applies, increasing the administrative burden on Canadian owners of real estate.

Who Must File a UHT Return?

Filing is required for all affected owners, including:

• certain Canadian-controlled private corporations (CCPCs) owning residential property

• partnerships holding residential real estate

• trustees of most trusts (including bare trusts) holding property

• non-residents owning residential property in Canada
  Even if you are exempt from the tax itself, you must still file if you are an affected owner.

Who Is Exempt From the Tax (But Still May Need to File)?

Exemptions apply if the property is:

• the primary residence of the owner, spouse, or child

• occupied for at least 180 days in the year in qualifying periods

• rented long-term (30-day+ leases) for at least 180 days

• newly constructed and not yet occupied

• unsuitable for year-round use

• undergoing major renovations

• used by the owner as a Canadian citizen or permanent resident (if held personally)
  Even when exempt, many taxpayers must file to declare their exemption, unless they are excluded owners.

Who Is an Excluded Owner (No Filing Required)?

Excluded owners include:

• Canadian citizens and permanent residents (personally, not through corporations or trusts)

• publicly traded Canadian corporations

• registered charities

• Indigenous governing bodies

• cooperative housing corporations
  If you are an excluded owner, you do not need to file a UHT return for that property.

Who Is an Affected Owner (Must File)?

Many Canadian property owners fall into this category:

• Canadian corporations (even if 100% Canadian-owned)

• partnerships

• trustees (including bare trustees)

• private holding companies

• individuals holding property on behalf of others
  These owners must file Form UHT-2900 every year to avoid penalties.

Tax Calculation: The 1% Rule

Tax applies only to affected owners who do not qualify for an exemption. The calculation is:
UHT = 1% × (Greater of assessed value or elective fair market value) × ownership percentage
Owners may elect a fair market value assessment with a professional appraisal.

Penalties for Not Filing

Penalties apply even when no tax is owed, and they are severe:

• Individuals: Minimum $5,000 per property

• Corporations: Minimum $10,000 per property
  Penalties can escalate if multiple owners or multiple properties are involved, or if CRA determines that filing was intentionally avoided.

Mackisen Strategy

At Mackisen CPA Montreal, we ensure clients meet UHT filing obligations, evaluate exemptions, determine whether they are affected or excluded owners, obtain valuations when beneficial, prepare Form UHT-2900 accurately, and respond to CRA review letters. We also assist clients who own property through corporations or trusts and require coordinated filing of UHT returns across multiple entities. Our strategy ensures zero penalties and full compliance.

Real Client Experience

A Montreal homeowner who held a condo in a family trust was shocked to learn they owed no UHT but still had a filing requirement; we filed the return and avoided a $5,000 penalty. A corporation owning a rental property was flagged by CRA; we filed late under relief provisions and minimized penalties. A family partnership holding a multiplex avoided tax by documenting 180-day occupancy. A non-resident owner avoided UHT tax after we proved long-term rentals exceeded the exemption threshold.

Common Questions

Do all Canadians have to file UHT? No—only affected owners such as corporations, partnerships, and trusts. Is UHT the same as vacancy tax? No—municipal vacancy taxes are separate. Does renting through Airbnb count as occupancy? Not for UHT; only long-term rentals count. What if I inherited a property? Filing may be required depending on structure.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps property owners navigate the Underused Housing Tax, avoid penalties, structure ownership properly, and comply with federal filing rules. Whether you own property personally, through a corporation, or through a trust, we ensure your UHT obligations are met accurately and on time.