The Underused Housing Tax (UHT) Act is a Canadian law that outlines the tax obligations of residential property owners. The act broadly applies to everyone except for those categorized as “excluded owners,” which primarily include Canadian citizens and permanent residents who are not trustees. Public corporations listed on stock exchanges are also exempt from these tax requirements.
Who Needs to File?
According to Section 6 (3) of the UHT Act, all registered property owners, other than the excluded ones, are required to submit a tax return by December 31 of each year. If no specific exemptions apply, a tax amounting to 1% of the property’s value is due by April 30 of the following calendar year.
Transitional Provisions for 2023
For the year 2023, there’s a bit of relief. While the final date for submitting the tax return and making the payment remains April 30, 2023, the government won’t levy any penalties or interest for filings received before November 1, 2023.
The act is applicable only to those residential properties whose owners are not in the “excluded” category. Furthermore, the owners must be the legally registered ones, appearing on the property’s title. All types of organizations, be they corporations or trusts, must file returns if they own residential properties and don’t qualify for exemptions.
As of now, the significant exemptions are documented under Section 6(7) of the UHT Act. These exemptions also extend to certain Canadian trusts, corporations, and partnerships. Executors are also temporarily exempted for the year of death and one subsequent year.
Specifics for Canadian Trusts and Corporations
The act specifies conditions under which Canadian trusts and corporations are exempt from this tax. For trusts, the exemption applies if all beneficiaries with an interest in the property qualify as excluded owners. The act, however, leaves the term “beneficial interest” undefined.
Interpretation for Executors
If an executor is a Canadian citizen or permanent resident, and all beneficiaries are either citizens or permanent residents, then the property should remain exempt from UHT.
Criteria for Canadian Corporations
The act defines “specified Canadian corporations” as entities that do not have 10% or more of their share capital owned by non-citizens or non-permanent residents. The threshold of 10% applies both to the value of the equity and the voting rights.
For more information on UHT, you can also visit https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html
You should consult a qualified tax professional for advice on whether you are required to file a UHT return and how to do so.
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