The federal government has announced select changes to its tax framework, including the repeal of the Underused Housing Tax as well as adjustments to the Luxury Tax and the GST/HST. Below is a concise summary of these developments and their implications.
Elimination of the Underused Housing Tax starting in 2025
The budget proposes to eliminate the federal underused housing tax (UHT), such that there would be no UHT returns or payments required in 2025 or subsequent years.
The UHT requirements for the 2022 to 2024 calendar years would continue to apply, including the application of penalties and interest for failing to file a return as and when required, or for late payment.
The cancellation of this federal tax would have no impact on various provincial or municipal underused housing taxes that are currently in force.
Elimination of the Luxury Tax on aircraft and vessels
The budget proposes to eliminate the luxury tax on aircraft and vessels, such that no tax would be payable in respect of the sale, importation, or improvements to subject aircraft and vessels after November 4, 2025.
Vendors who are currently registered with respect to aircraft and vessels would be required to file a final return covering the reporting period that includes November 4, 2025. Registrations would be maintained to allow vendors to claim applicable rebates (e.g., for exported items) before being automatically cancelled on February 1, 2028.
Luxury tax will continue to apply to subject vehicles with a value over $100,000.
GST/HST changes
The budget proposes to clarify the treatment of manual osteopathic services. Osteopathic services rendered by individuals who are not osteopathic physicians would be subject to GST/HST. This would apply to supplies made after June 5, 2025, but not to supplies made between then and November 4, 2025, if the supplier did not charge, collect, or remit tax in respect of the supply.
The budget also announced proposed changes to combat carousel fraud with a new reverse charge mechanism beginning with certain telecommunication services acquired for resupply. A reverse charge mechanism requires a purchaser to report the tax payable on a purchase, rather than pay it to a vendor. The government is accepting feedback until January 12, 2026, before finalizing the design of the new rules and introducing legislation.
