estate planning / Andrii Yalanskyi

The Canada Revenue Agency (CRA) has effectively extended the deadline for filing the new return related to the 1% underused housing tax (UHT).

The CRA announced Monday that it will not apply penalties or interest to UHT returns or payments sent late as long as the CRA receives them by Oct. 31. The official deadline for filing the UHT return and making UHT payments remains April 30 (May 1, 2023, for the 2022 tax year).

This deadline relief applies only to returns and payments related to the 2022 tax year.

The penalties for late-filing are stiff: at least $5,000 for individuals, and $10,000 for corporations, for each residential property. If the UHT is payable, penalties may climb higher the later the return is filed, with no cap in the legislation.

Tax practitioners have expressed concern over the feasibility of filing the return on time this year, especially as the form was only released on Jan. 31.

Effective for 2022, the UHT is an annual 1% tax on the ownership of vacant or underused housing in Canada. The tax is part of the federal government’s strategy to address housing affordability. The UHT is separate from and in addition to the vacant home taxes introduced in Vancouver in 2017 and in Toronto and Ottawa in 2022.

“Excluded owners,” which include Canadian citizens, permanent residents, listed corporations, REITs and charities, do not have to file a UHT return.

“Affected owners” owning a residential property in Canada on Dec. 31 must file a UHT-2900 Underused Housing Tax Return and Election Form by April 30 of the following year. The definition of affected owners includes someone who owns an interest in residential property through a partnership or as a trustee of a trust — excluding Canadian executors of estates. Small-business corporations that own residential property also are defined as affected owners.

An affected owner must pay the 1% annual tax on the value of each residential property unless they qualify for an exemption. Exemptions are available, for example, for residential properties that serve as primary residences or meet “qualifying occupancy” requirements; a vacation home located in an eligible area; or a property that is seasonally inaccessible or uninhabitable for part of the year.

A “specified Canadian corporation” also is exempt from tax if foreign owners own or control less than 10% of the shares or votes. A “specified Canadian partnership” or a “specified Canadian trust” is exempt from tax if all partners or beneficiaries, respectively, are excluded owners or are specified Canadian corporations.

Taxpayers can file the UHT return through the CRA’s My Account and My Business Account portals. To do so, they will require a CRA tax identifier number and a digital access code.

The CRA stated that as long as the UHT return and tax identifier application are received before April 30, the UHT return will not be considered filed late.

With files from Rudy Mezzetta