What is the federal Underused Housing Tax and does it apply to my property?

The Underused Housing Tax (UHT) is a federal annual tax of 1% on the assessed or fair market value of certain "underused" residential properties in Canada. It was introduced by the federal government effective for calendar years beginning in 2022. The UHT primarily targets non-residents and non-Canadian owners of vacant or underused residential property.

Most Canadian citizens and permanent residents who own a residential property directly and in their own name are "excluded owners" who are exempt from paying UHT and exempt from the filing obligation. However, Canadian owners who hold property through a corporation, partnership, or trust — even a Canadian one — may need to file a UHT return (Form UHT-2900) each year, even if no tax is ultimately owed. The penalty for failing to file when required is significant and is applied per property.

Non-resident owners who are not Canadian citizens or permanent residents are affected more broadly and may owe the 1% tax unless an exemption applies (for example, if the property is a qualifying rental property with arm's length tenants, or if the owner occupies it personally for a specified number of days per year).