The Underused Housing Tax (UHT): Do You Have to File?

Canada's underused housing tax is one of the most misunderstood federal taxes introduced in recent years — not because it is complicated in principle, but because the filing obligation catches many people off guard. You may owe nothing, yet still be required to file a return. Miss the deadline, and the penalties can be significant.

This article explains the core concepts behind the underused housing tax in Canada, who is considered an "affected owner," how exemptions work, what the penalties look like, and what steps to take if you are unsure whether you need to file. Because the rules in this area have changed more than once since the tax was introduced, it is essential to verify current requirements directly with the Canada Revenue Agency (CRA) or with a qualified tax professional before taking action.

What Is the Underused Housing Tax?

The underused housing tax (UHT) is a federal annual tax that applies to certain residential properties in Canada that are considered vacant or underused. It was introduced through the Underused Housing Tax Act and came into effect for calendar years beginning in 2022.

The policy goal is straightforward: encourage owners of vacant or underused residential properties to make those properties available on the housing market, or to pay a tax if they do not. The tax is calculated as a percentage of the property's assessed value or its fair market value — whichever method applies — and the rate is set out in the Underused Housing Tax Act. As of writing, confirm the current rate with CRA, as rates and calculation methods can be updated by regulation.

The tax applies to residential property — think detached homes, semi-detached homes, rowhouses, condominium units, and similar dwellings — situated in Canada.

Excluded Owners vs. Affected Owners

This is where most of the confusion lives. The Underused Housing Tax Act divides residential property owners into two categories.

Excluded Owners

Excluded owners have no filing obligation at all under the UHT. As of writing, this category generally includes:

• Canadian citizens and permanent residents who hold the property directly (not through a corporation, partnership, or trust)
• Canadian publicly traded corporations
• Certain registered charities and co-operative housing corporations
• Municipalities and other public bodies

If you are a Canadian citizen or permanent resident and you own your home in your own name, you are typically an excluded owner and do not need to file a UHT return. Confirm this with a tax professional if you have any doubt.

Affected Owners

Affected owners must file a UHT return for every eligible residential property they own — even if they qualify for an exemption and owe zero dollars in tax. This is the rule that surprises people most.

As of writing, affected owners generally include:

• Non-Canadian citizens and non-permanent residents who own Canadian residential property
• Canadian corporations (both private and certain other corporations)
• Partnerships that hold residential property
• Trustees of trusts (including bare trusts) that hold residential property
• Individuals who hold property as a nominee or agent

Important: The CRA has revised the rules around who qualifies as an affected owner — including changes affecting Canadian private corporations and trusts — since the tax was first introduced. Do not rely on information from earlier years without confirming the current rules with CRA or a qualified tax advisor.

Exemptions From the Tax Itself

Being an affected owner means you must file. It does not necessarily mean you will owe tax. The Underused Housing Tax Act provides exemptions that, if they apply to your situation, reduce the amount of tax payable to zero. However, you must still file the return and claim the exemption.

Common exemptions include (verify current availability and criteria with CRA):

• Primary place of residence: The property is the owner's primary residence, or the residence of their spouse, common-law partner, or qualifying child
• Qualifying occupancy: The property is occupied by a qualifying tenant under a written lease for a required minimum period during the calendar year
• New owner: The owner acquired the property during the year in question
• Uninhabitable property: The property was not suitable for year-round use due to renovation, destruction, or other circumstances beyond the owner's control
• Death of an owner: The owner, or their spouse or common-law partner, died during the year or the prior year

Each exemption has specific qualifying conditions. The rules around what counts as a qualifying tenancy, for instance, include minimum-duration and written-agreement requirements. A tax professional or accountant can assess which exemptions apply to your circumstances.

Penalties for Not Filing

This is where the UHT becomes costly. Affected owners who fail to file a return by the deadline — even if they would have owed no tax — face a minimum penalty. As of writing, the minimum penalty for individuals is set out in the Underused Housing Tax Act and is substantial; for corporations, the minimum is higher. Check the current penalty amounts with CRA, as these figures can be adjusted.

Interest also accrues on any unpaid tax. And if the CRA determines that a return was filed late or not at all, it may reassess and impose additional penalties depending on the circumstances.

The filing deadline for each calendar year is set by the Underused Housing Tax Act and CRA policy — confirm the current deadline with CRA, as it has been extended in previous years. Do not assume a prior-year deadline applies to the current year.

Steps to Take If You Are Unsure

1. Determine whether you are an excluded or affected owner. Review the current CRA guidance on the UHT or speak with a tax professional. Do not assume that because you are Canadian, you are automatically excluded — the structure of your ownership (through a corporation, trust, or partnership) matters.
2. Identify every residential property you own in Canada. The filing obligation is per property, per year.
3. Check whether an exemption applies. Even if you must file, you may owe nothing — but you still need to file.
4. File on time. Late filing attracts minimum penalties regardless of whether you owe tax.
5. Work with an accountant or tax professional. A qualified tax advisor can review your ownership structure, identify exemptions, and file accurately. If there are legal questions about property ownership structures, an Ontario lawyer can also assist.

Frequently asked questions