Canada’s Underused Housing Tax

January 6, 2023

The Government of Canada enacted a 1% Underused Housing Tax (“UHT”)  on the fair market value of Canadian residential real estate held by certain owners.  Various exemptions apply to limit the application of this tax.  This tax is effective January 1, 2022 and requires reporting by May 1, 2023.

Who Does UHT Apply To?

UHT applies to all residential homeowners that are not excluded.  Owners of Canadian residential property affected by the UHT include:

  • Non-citizens of Canada and do not have permanent resident status in Canada
  • A Canadian citizen or permanent resident who is trustee of a living trust that owns the property
  • Any individual that owns the property through a partnership
  • A corporation formed outside of Canada
  • A privately held corporation, including one with no share capital

Who is Not Subject to UHT?

There are six possible categories under which someone would be considered an excluded owner.  If the property is directly owned by one of the following:

  • A Canadian citizen or permanent resident
  • A mutual fund trust, real estate investment trust, or specified investment flow-through trust
  • A Canadian publicly listed corporation
  • A Canadian registered charity
  • A Canadian cooperative housing corporation, or
  • An Indigenous governing body or a corporation owned 100% by an Indigenous governing body

What Exemptions are Available from UHT?

There are exemptions available to avoid paying the UHT.  Those eligible for the exemption must still complete their UHT return in order to claim the exemption from it.

The categories of exemptions available include: 

  • Ownership by an exempt taxpayer
  • Residential property not available for use at some point throughout the year
  • Residential vacation property that is in a qualified area
  • Occupancy by an eligible person throughout a qualifying occupancy period.

Within each of these categories there are a subset of specific areas in which an affected person or property can qualify for the exemption.  These are listed on the Government of Canada website linked below.

How to Determine the Property’s Value?

An affected owner can use one of two options available in determining the fair market value of the property:

  • The taxable value based on its property tax assessment
  • Elect to use the property’s current fair market value. 

If the election to use the property’s current fair market value is made, the owner must receive an appraisal on the property from an arm’s length professional appraiser.

What Reporting is Required for the UHT?

All affected owners are required to file and report the residential property for UHT purposes regardless if they qualify for one of the exemptions above.  The reporting and applicable UHT tax is due on April 30 of the year following the applicable calendar year.  A UHT return must be submitted separately for each property, regardless of exemptions.  Multiple properties cannot be combined onto one UHT return.

The UHT return must be timely filed to elect the fair market value or to qualify for exemptions as a primary residence.

Affected owners will be required to have a tax identification number in order to submit the applicable reporting forms. More information on the UHT can be found at: Underused Housing Tax –