Significant rule changes were announced in November 2023; the below may not apply for many taxpayers in calendar year 2023 due in April 2024. UPDATE — Jan 31 2023: the form was released by CRA; we have also received access to a useful Quick Reference Chart from our friends at Video Tax News.
As of December 31, 2022, a tax of 1% will apply to the value of any residential property that is considered underused and owned by an affected owner.
If you own the property in a clear and direct ownership structure (i.e. it is in your name for your use) and are a Canadian citizen or permanent resident, the filing requirement will likely NOT apply to you.
However, if the property is owned in a more indirect way, you may have a filing requirement but may also qualify for an exemption from the tax. We recommend that you review the below and consult with us to determine whether or not this tax applies to you and, if so, how you can take advantage of any potential exemptions.
How do I file, and penalties?
CRA has set a deadline of April 30. There are significant penalties if you fail to file an Underused Housing Tax return when it is due. Affected owners who are individuals are subject to a minimum penalty of $5,000. Affected owners that are corporations are subject to a minimum penalty of $10,000.
Required / affected owners (list is not exhaustive)
- An individual who is not a Canadian citizen or permanent resident.
- An individual who is a Canadian citizen or permanent resident and who owns a residential property as a trustee of a trust (other than as a personal representative of a deceased individual).
- Any person — including a Canadian citizen or PR — that owns a residential property as a partner of a partnership.
- A corporation incorporated outside Canada.
- A Canadian corporation whose shares are not listed on a designated Canadian stock exchange.
- A Canadian corporation without share capital.
Exempt from filing
- An individual who is a Canadian citizen or permanent resident — unless included in the list of affected owners above.
- Any person that owns a residential property as a trustee of a mutual fund trust, REIT, or SIFT.
- A Canadian corporation whose shares are listed on a designated Canadian stock exchange.
- A registered charity.
- A cooperative housing corporation for GST/HST purposes.
- An Indigenous governing body or a corporation wholly owned by one.
Some common traps
- You may own property, but at least one of the registered owners is NOT a Canadian citizen or PR — possibly a spouse, partner or shareholder.
- You may own real estate in a corporation — not personally.
- Real estate may be owned by a bare trustee arrangement, in which case filing would be required.
If I am required to file but qualify for an exemption — what are the general exemptions?
- A vacation property located in an eligible area of Canada and used by you or your spouse/common-law partner for at least 28 days in the calendar year.
- Your immediate family member lives in the property for school at a designated learning institution.
- For at least 180 days in the calendar year there was a "qualifying occupancy" (a period of at least one month occupied by a qualifying individual).
- The property is inaccessible for a period of the year.
- A property not owned in the last 10 years was acquired or sold.
- Death while owning the property.
More exemptions apply and the above is only a summary — please let us know if you are claiming an exemption to ensure you qualify.
What if I own multiple properties?
If between you and your spouse or common-law partner you own multiple residential properties, your ownership may not qualify for the primary-place-of-residence or qualifying-occupancy exemptions unless you file an election with the CRA to designate only one property (generally the more expensive one).
How would they catch me if I don't file?
For non-residents / non-Canadians, the sale of a property requires a section 116 compliance certificate, and CRA is expected to review the history of the property for filings. CRA is currently reviewing most real estate transactions in BC, and with increased "transparency" filings the information will be there — it is just a question of whether they can connect the dots.
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