CRA has assessed $30M in underused housing tax to date

The Canada Revenue Agency has assessed $30.3 million of underused housing tax (UHT) so far, a figure well below the federal government’s revenue estimates for the new program.

In an email, CRA spokesperson Nina Ioussoupova told Advisor.ca the agency had assessed $30,315,000 of UHT as of Dec. 14, 2023 for the 2022 tax year. That figure represented the amount of tax the CRA had assessed on the UHT returns it had finalized, not the total number of UHT returns it had received, she said.

The amount assessed is likely to rise as the CRA will continue receiving UHT returns for 2022.

The deadline to file a UHT return for 2022 remains April 30, 2023, but the CRA has twice extended the deadline to file a UHT return for 2022 without incurring penalties or interest. The effective deadline for filing 2022 returns is now April 30, 2024.

Ioussoupova also said that, as of Dec. 14, the CRA had finalized or was in the process of finalizing 426,200 UHT returns. Of the finalized returns, 1.69% had an amount of UHT owing.

The government’s revenue estimates for the UHT have fluctuated over the years.

The 2021 federal budget estimated the tax would generate $700 million over four years, beginning in 2022–23. The revenue would be used to help “support the government’s investment to make housing more affordable for Canadians,” the government said.

In the 2022 budget, the government projected it would generate $200 million in UHT in 2022–23.

And on testimony to the Standing Committee on International Trade in June 2023, Robert Ives, expert advisor in the sales tax division of the Department of Finance’s tax policy branch, said department estimates were that the UHT program would generate $875 million in UHT between 2022–23 to 2027–28, and $140 million annually thereafter.

First proposed in Budget 2021, the UHT is an annual 1% tax on the ownership of vacant or underused housing in Canada, effective in 2022 and subsequent years. That tax generally applies to foreign owners of Canadian residential property but can apply to Canadians in certain circumstances.

The amount of UHT the CRA has assessed has risen since last summer, after the agency provided its first extension — to Oct. 31, 2023 — for filing the UHT return for 2022 without interest or penalties, but before it provided its second extension.

In testimony to the Standing Committee on International Trade in June, Adnan Khan, director general of the business returns directorate of the assessment, benefit and service branch of the CRA, reported that as of June 15, 135,000 UHT returns had been filed and $7.5 million UHT had been assessed. Of the UHT returns filed to that date, less than 5% involved a UHT amount owing, Khan said. 

While the UHT mostly affects foreign owners of Canadian residential property, a Canadian who owns a property through a trust, private corporation or partnership has an obligation to file a UHT return. If the trust, corporation or partnership is substantially or entirely Canadian they may qualify for an exemption from the UHT as a “specified” Canadian corporation, Canadian partnership or Canadian trust.

In the fall economic statement, released in November, the government proposed to expand the definition of “excluded owner” — a taxpayer who doesn’t have an obligation to file a UHT return — to include these specified Canadian corporations, partnerships or trusts.

The proposed change would be effective for 2023 and subsequent years, but would not be retroactive to 2022.

The federal government also proposed reducing penalties associated with the failure to file a UHT return to $1,000 for individuals from $5,000 currently, and to $2,000 for a corporation from $10,000.

That proposed change would be effective for 2022 and subsequent years.

The government released draft legislation containing those proposals for consultation ending Jan. 3, 2024.

The changes are being proposed “in response to suggestions from Canadians about the implementation of the UHT,” the government said, and would help “facilitate compliance, while ensuring the tax continues to apply as intended.”

The government estimated that the proposed changes would have no effect on the total UHT it assessed.

The UHT return and payment deadline for the 2023 tax year is April 30, 2024, the same date as the effective deadline date for the 2022 UHT returns and payments.