Tax on Underused Housing: Obligations for Several Canadian Entities

A return will have to be filed with the CRA no later than April 30, with respect to any residential property (detached house, condominium, duplex or triplex) held in Canada by a Canadian private corporation, a personal trust or a partnership.

Non-resident individuals are also subject to this obligation provided in the Underused Housing Tax Act.

Important: plan to request an identification number (if necessary)

For this purpose, corporations will need to obtain an Underutilized Housing Tax (UR) Program Account. This request can be made online, starting February 7. Non-resident individuals will need to have a tax identification number (ITN) to file this return.

Summary of applicable rules

Since 2022, any owner, on December 31 of the year, of a residential property located in Canada may be subject to the Underused Housing Tax Act. Subject owners must file a declaration and, in certain cases, pay a tax of 1% of the value of the building, on an annual basis.

This tax essentially applies to vacant or underutilized residential properties that are directly or indirectly owned by non-resident aliens. Canadian citizens and permanent residents who personally own a residential property in Canada are not subject to this law.

Private taxable Canadian corporations as well as Canadian citizens and permanent residents who own residential property through a personal trust or partnership are not excluded owners. They may be exempt from the tax, but they are required to file an annual return with the CRA in order to claim this exemption. Failure to comply with this obligation by April 30 of the following calendar year may result in significant penalties.