The Canada Revenue Agency (CRA) is giving affected homeowners a second extension to file an Underused Housing Tax return, making the announcement on the last day before the first extension was set to expire.<\/p>\n

On Tuesday, the CRA said it would waive the application of penalties and interest for any late-filed UHT returns and for late-paid UHT payable for the 2022 calendar year, provided the return is filed and the UHT paid by April 30, 2024.<\/p>\n

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The CRA said the extension would allow more affected owners to meet their obligations.<\/p>\n
\u201cWe understand that many homeowners may not be aware that they are subject to this new law,” said National Revenue Minister Marie-Claude Bibeau in a release<\/span>. “This is why I want to ensure that every effort has been made to inform homeowners and help them meet their obligations.\u201d<\/p>\n
In March, the CRA gave affected homeowners a six-month extension<\/a> beyond the official deadline of April 30 to file a UHT return and pay any UHT tax for the 2022 calendar year without incurring penalties and interest.<\/p>\n
One tax professional suggested the federal government might be experiencing difficulty behind the scenes in administering the UHT regime.<\/p>\n
\u201cThis is what happens when a policy sounds simple in concept but is actually really, really hard to implement effectively,” said Noah Sarna, a commodity tax partner with Thorsteinssons Tax Lawyers in Toronto, in a Linkedin post following the CRA\u2019s announcement.<\/p>\n
Effective for 2022, the UHT is an annual 1% tax on the ownership of vacant or underused housing in Canada.<\/p>\n
The tax applies to “affected owners,” including foreign and non-permanent resident owners of residential property in Canada, as well Canadians who own residential property through a trust, private corporation or partnership. Affected owners must file a return, but may be exempt from the tax itself if the property qualifies under a qualifying occupancy or other exemption.<\/p>\n
Penalties for late-filing a UHT return are significant: at least $5,000 for individuals, and $10,000 for corporations, for each residential property. If the UHT is payable, penalties may climb higher the later the return is filed, with no cap in the legislation.<\/p>\n
The CRA is currently charging 9% interest<\/a> on overdue tax, but that rate will increase to 10%<\/a> in the first quarter of 2024.<\/p>\n
Tax practitioners have been sounding the alarm for months<\/a> that many Canadians may have a UHT filing requirement without knowing it.<\/p>\n
For example, if a child is put on title for a residential property by their parent who continues to live in the house as the beneficial owner, a bare trust arrangement is created<\/a>. Such transactions are often done for estate-planning purposes.<\/p>\n
As the property is owned by a trust, the trustee as the legal owner of the property must file a UHT return. However, if the parent is a Canadian citizen, the trust is considered a specified Canadian trust, and no UHT is payable.<\/p>\n
The UHT return could also represent a filing nightmare.<\/p>\n
For example, owners of multi-residential properties of more than three units are not subject to the UHT rules, meaning owners of apartment buildings do not typically have a UHT return filing requirement.<\/p>\n
However, where an affected owner (such as a foreigner or a trust or a private corporation) owns a multi-residential rental property where each unit has separate ownership and registered title (known as condominiumization), a UHT return must be filed for each unit, said Antony Schiefer, tax partner with KPMG, in a presentation given at the Canadian Tax Foundation’s Ontario Tax Conference on Oct. 24.<\/p>\n
“Three of my clients amount to about 5,000 tax returns that we have to file in respect of the UHT, [even though] there’s no tax to pay,” Schiefer said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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