The Underused Housing Tax (UHT) has gained much attention since it was introduced and took effect on January 1, 2022. The first UHT returns for 2022 were due May 1, 2023. The CRA announced in March that while this filing deadline would not be extended, no penalties or interest would be assessed on UHT returns for 2022 provided they were filed, and any taxes owing were paid, by October 31, 2023. However, on October 31, 2023, the CRA announced a further extension to April 30, 2024 for filing 2022 returns without penalties or interest. This means that penalties and interest will not be levied in relation to 2022 UHT returns provided the returns are filed and any tax owing is paid by April 30, 2024, which is also the deadline for filing 2023 UHT returns.
These concessions by the government appear to have been necessary due to a lack of awareness of filing obligations and the complexity of complying with UHT rules, particularly for 2022, the first calendar year subject to filing. We expect that the second concession will also apply to certain elections available under the Underused Housing Tax Act (UHTA), consistent with guidance provided by the CRA after the first concession was announced.
The CRA has also recently expanded its commentary on the UHTA by updating the UHT Notice 15 - Questions and Answers About the Underused Housing Tax. The relief from penalties and interest and the additional guidance from the CRA are welcome.
As noted in the BDO article Underused housing tax program: considerations for Canadian corporations, partnerships, and trusts, many Canadian corporations, partners and trustees will need to file a UHT return but will be exempt from the UHT. The CRA has stated that although this filing will still be required if the taxpayer is exempt from the tax, it will not be necessary to report the value of the property on which the tax would be assessed, provided the UHT return is filed by December 31 of the following calendar year. For example, the value of the residential property is not required to be reported on the 2022 UHT return where the person is exempt and the return is filed by December 31, 2023. It is unknown whether the CRA will extend this relief to April 30, 2024 to coincide with the extended waiver of penalties and interest.
Note that with the extension to April 30, 2024, a UHT return for 2022 filed after that date may be subject to significant late filing penalties, even if ownership of the property is exempt.
Further information about the UHT and UHT filings can be found at the following BDO articles: