Industry organizations and tax professionals are calling on Ottawa to extend its proposed underused housing tax (UHT) filing exemption relief back to 2022.
First proposed in the 2021 federal budget, the UHT is an annual 1% tax on the ownership of vacant or underused housing in Canada, effective for 2022 and subsequent years. That tax generally applies to foreign owners of Canadian residential property but can apply to Canadians who own residential property through a trust, corporation or partnership.
In the 2023 fall economic statement, the government proposed exempting a person who owns residential property in Canada through a trust, corporation or partnership from filing a UHT return from 2023 onward if the entity is substantially or entirely Canadian — and therefore already eligible for an exemption from the tax itself.
However, a person who owned a home through such an exempt Canadian entity would still have a filing requirement for 2022.
The consultation period for the proposed legislation ended Jan. 3.
The Conference for Advanced Life Underwriting’s (CALU) submission to the Department of Finance said it was “inappropriate” for the government to require reporting for exempt Canadian entities for 2022, while also proposing to lift the requirement for subsequent years.
“The government has recognized by proposing this amendment that such obligation imposes an unnecessary burden on exempt Canadian entities,” CALU said.
The Joint Committee on Taxation of the Canadian Bar Association and CPA Canada also recommended the proposed change be retroactive to 2022.
Doing so would avoid creating a “one-time filing event” for exempt Canadian entities, said John Oakey, vice-president of taxation with CPA Canada in Dartmouth, N.S., in an email to Investment Executive.
In a Dec. 29 post on Linkedin, Hugh Neilson, a tax consultant in private practice in Edmonton, said that he also recommended to Finance that they extend the filing waiver to 2022. Neilson suggested that requiring non-compliant filers to file wouldn’t represent a benefit to those who already had filed.
The deadline to file a UHT return for 2022 remains April 30, 2023, but the Canada Revenue Agency (CRA) has twice extended the effective deadline to file a return without incurring penalties or interest. The effective deadline for filing 2022 returns is now April 30, 2024, which is also the deadline for filing 2023 UHT returns.
The CRA provided the deadline extensions to give affected owners more time to comply with their obligations, the agency indicated.
Last month, the CRA told Investment Executive that it had finalized or was in the process of finalizing 426,200 UHT returns for 2022, as of Dec. 14.
In reply to questions from Investment Executive, a Department of Finance official wrote in a Jan. 4 email that the government would “now carefully consider and review the submissions received [during the UHT consultation], in order to introduce the legislative amendments in Parliament in due course.”
The official did not respond to questions as to whether legislative amendments would be introduced in the 2024 federal budget, or before the April 30, 2024 deadline for 2022 and 2023 UHT returns.