Exemption for New Owners
Underused Housing Tax Notice UHTN11
February 2023
The purpose of this notice is to help you determine if your ownership of a residential property qualifies for the exemption for new owners.
Except as otherwise noted, all statutory references in this publication are to the provisions of the Underused Housing Tax Act (UHTA) and its regulations. The information in this publication does not replace the law found in the UHTA and its regulations.
Table of Contents
Overview
The Government of Canada has introduced an underused housing tax on the ownership of vacant or underused housing in Canada. The Underused Housing Tax Act (UHTA), which governs the underused housing tax, received royal assent on June 9, 2022. The underused housing tax took effect on January 1, 2022.
The underused housing tax
If you are an affected owner of a residential property on December 31 of a calendar year, you have to pay the underused housing tax for the residential property for the calendar year, unless your ownership of the residential property is exempt from the tax for the calendar year.
Where certain conditions are met, your ownership of a residential property may be exempt from the underused housing tax if the property is any of the following:
- a vacation property that is located in an eligible area of Canada
- used as a primary place of residence or for qualifying occupancy
- not suitable for year-round use
- seasonally inaccessible
- uninhabitable during the calendar year
- newly constructed
Your ownership of a residential property may also be exempt if you are any of the following:
- a partner of a specified Canadian partnership, a trustee of a specified Canadian trust, or a specified Canadian corporation
- a new owner
- a deceased individual, or their personal representative or co-owner
For more information about the above exemptions, refer to the various Underused housing tax notices.
Even if your ownership of a residential property is exempt from the underused housing tax for a calendar year, as an affected owner, you still have to file a return for the residential property using Form UHT-2900, Underused Housing Tax Return and Election Form.
There are significant penalties if you fail to file an annual return when it is due. Affected owners who are individuals are subject to a minimum penalty of $5,000. Affected owners that are corporations are subject to a minimum penalty of $10,000. For more information, refer to Underused Housing Tax Notice UHTN3, Filing a Return and Paying the Underused Housing Tax.
For an explanation of affected owner, owner and residential property, and to determine whether the underused housing tax applies to you, refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax.
Exemption for new owners
If you are an affected owner of a residential property on December 31 of a calendar year, your ownership of the residential property is exempt from the underused housing tax for the calendar year if both of the following conditions are met:
- you became an owner of the residential property in the calendar year
- you were never an owner of the residential property in any of the previous nine calendar years
Example 1
Individual A and Individual B are spouses who are not citizens or permanent residents of Canada. Each of them is identified in the land registration system as an owner having 50% ownership of a property in Canada (a semi-detached house) that they jointly purchased in 2022. Neither of them has been an owner of the property at any time before 2022.
Individual A and Individual B each have to file a separate return for the property for the 2022 calendar year by April 30, 2023. Neither of them has to pay the underused housing tax for their respective 50% ownership percentage of the property for the 2022 calendar year because each of them became an owner of the property in that calendar year and neither of them was an owner of the property in any of the previous nine calendar years.
Example 2
Individual C and Individual D are spouses who are not citizens or permanent residents of Canada. On December 31, 2022, each of them is identified in the land registration system as an owner having 50% ownership of a property in Canada (a detached house).
Individual C has been an owner of the property since 2020 when they purchased the property on their own. Individual D became an owner of the property in 2022 when they acquired 50% ownership from Individual C. Individual D was not an owner of the property in any of the previous nine calendar years.
Individual C and Individual D each have to file a separate return for the property for the 2022 calendar year by April 30, 2023.
Where their ownership of the property does not qualify for any other exemption, Individual C has to pay the underused housing tax for their 50% ownership of the property for the 2022 calendar year by April 30, 2023, as the exemption for new owners does not apply because Individual C did not become an owner of the property in 2022.
Individual D does not have to pay the underused housing tax for their 50% ownership of the property for the 2022 calendar year because Individual D became an owner of the property in 2022 and was not an owner of the property in any of the previous nine calendar years.
Keeping records
Every affected owner of a residential property must keep records to enable the determination of their obligations and liabilities under the UHTA. Generally, you must keep the records for six years from the end of the year to which they relate.
If you do not have adequate records to support that your ownership of a residential property is exempt from the underused housing tax for a calendar year, the Canada Revenue Agency may disallow your exemption.
Further information
For all technical publications related to the UHTA, go to Underused housing tax technical information.
For general enquiries about the underused housing tax, call the applicable telephone number:
- if you are calling about a residential property that is owned by an individual and you are calling from:
- within Canada or the United States, call 1‑800‑959‑8281
- outside Canada and the United States, call 613‑940‑8495 (collect calls accepted)
- if you are calling about a residential property that is owned by a corporation and you are calling from:
- within Canada or the United States, call 1‑800‑959‑5525
- outside Canada and the United States, call 613‑940‑8497 (collect calls accepted)
To request a ruling or an interpretation related to the application of the underused housing tax, write to:
GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville Tower A 5th floor
320 Queen St
Ottawa ON K1A 0L5
Canada
Fax: 1‑418‑566‑0319
Refer to GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service , which explains the rulings and interpretations service offered by the Canada Revenue Agency.
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