Bare trust or nominee corporations holding residential property in Canada on December 31 are required to file an Underused Housing Tax Return by April 30 of the following calendar year. The inaugural Underused Housing Tax Return is due April 30, 2023.
The Underused Housing Tax Act (the “Act”), which came into effect on January 1, 2022, implements an annual 1% tax on the value of vacant or underused residential property in Canada that is directly or indirectly owned by non-resident, non-Canadian individuals.
Every owner of residential property who is not an “excluded owner” under the Act must file an annual return, even if an exemption applies such that no tax is payable. Trustees of trusts (other than personal representatives of an estate and trustees of a mutual fund trust, a real estate investment trust or a SIFT trust), including but not limited to alter ego trusts and joint spousal/partner trusts, are not excluded owners under the Act and therefore must file an annual return. However, a tax exemption will generally apply if the beneficial owner of the residential property is a Canadian citizen or permanent resident.
Failing to file a required return results in a minimum penalty of $5,000 if the person is an individual, or $10,000 if the person is not an individual.
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