The 2021 federal budget announced the 1% Underused Housing Tax (UHT) that came into effect on January 1, 2022, and certain residential property owners in Canada will be required to file UHT returns for the 2022 calendar year by April 30, 2023. For more details, visit our blog post highlighting all of the announcements and updates, here.

Underused Housing Tax

Under the UHT Act, the 1% Underused Housing Tax applies each year to every person that is an owner (other than an excluded owner) of residential property in Canada as of December 31 of the calendar year.

To calculate the Underused Housing Tax, the owner must generally multiply the assessed value of the property by 1%. The owner may elect to use the fair market value (instead of the assessed value) of the property as determined any time from January 1 of the calendar year to April 30 of the following calendar year. If there are multiple owners of one property, each owner would be liable for this tax in proportion to their “ownership percentage” in the property.


The Underused Housing Tax rules do not apply to “excluded owners”, which include:

  • Individuals that are Canadian citizens or permanent residents of Canada (unless they hold the property interest as a partner in a partnership or as a trustee of a trust),
  • Corporations incorporated in Canada or a province whose shares are listed on a Canadian stock exchange for which a designation is in effect under section 262 of the Income Tax Act,
  • Registered charities,
  • Cooperative housing corporations, municipalities, colleges and universities, and
  • Trustees of mutual fund trusts, real estate investment trusts (REITs) or specified investment flow-through (SIFT) trusts (as these terms are defined in the Income Tax Act).

But wait, there’s more! The rules provide other exemptions from the Underused Housing Tax, including for:

  • Specified Canadian corporations (i.e., a corporation incorporated (or continued) in Canada), depending on the status of direct and indirect shareholders or for a corporation without share capital, the residence status of the chairperson and certain directors,
  • Specified Canadian partnerships and specified Canadian trusts, depending on the status of direct and indirect partners or beneficiaries, respectively,
  • Where the owner meets a minimum “qualifying occupancy” test,
  • Where the owner dies,
  • Where a dwelling unit within the property is uninhabitable for a period of at least 120 consecutive days in the calendar year as a result of a renovation without unreasonable delay, and this exemption was not used for any of the nine prior calendar years,
  • Where construction of the property is not substantially completed before April of the calendar year,
  • Where construction of the property is substantially completed after March of the calendar year, the property is offered for sale to the public during the calendar year and has never been occupied by an individual during the calendar year,
  • Property that is newly acquired in certain circumstances,
  • Property that is not suitable for year-round use as a place of residence, and
  • Property that is the primary place of residence of:
    • The owner
    • The owner’s spouse or common-law partner, or
    • The child of the owner or the owner’s spouse or common-law partner if the child occupies the property for the purposes of certain authorized studies.


Affected owners are required to remit the tax on or before April 30 of the following calendar year. This new tax generally requires owners (other than excluded owners) to file an annual prescribed return with the Canada Revenue Agency for each Canadian residential property they own, beginning with the 2022 calendar year.

Keep in mind that the UHT Act also contains anti-avoidance rules, along with administration- and enforcement-related rules, which include penalties and interest for failing to file required UHT returns).