Skip to main content

An Overview of the Proposed Underused Housing Tax Act

January 31, 2022

By: Stanley Ndibe


In the 2020 Fall Economic Statement, the government of Canada announced its intention to introduce and implement a tax-based measure targeting “unproductive use of houses”. The tax would be targeted at vacant properties.

The Underused Housing Tax Act (the “UHTA”) was first announced in the government’s 2020 Fall Economic Statement ( Fall Economic Statement 2020 (, revisited in the 2021 Budget (Budget 2021) and lastly in the Economic and Fiscal Update 2021 (Economic and Fiscal Update 2021 (

The policy behind UHTA is government’s position that speculative demand and purchase of Canadian residential properties by foreign non-resident investors contributes to higher residential housing prices in Canada, making it difficult for many Canadians to purchase their first homes.

On December 15, 2021, Bill C-8 (An Act to implement certain provisions of the economic and fiscal update tabled in Parliament on December 14, 2021 and other measures) passed through first reading. The bill introduced the UHTA, amongst others. It is expected that the when the UHTA is passed into law, it will retroactively take effect from January 1, 2022.

This article sets out a broad overview of the key provisions of the UHTA. In particular, the article reviews (i) taxable persons under the UHTA, (ii) computation of tax payable; (iii) exemptions from UHTA; and (iv) administrative and enforcement provisions of the UHTA.

Taxable Persons under the UHTA

The UHTA applies to every person that is an owner of a residential property on December 31 of the prior calendar year except “excluded owners”. The exception for “excluded owners” appears to reflect the policy objective of the UHTA to target foreign ownership of residential properties. Thus, the UHTA exempts the following persons:

  1. Her Majesty in right of Canada or a province or one of her agents;
  2. An individual who is a Canadian citizen or permanent resident, unless such individuals own the property as trustee of a trust or as a partner of a partnership;
  3. A corporation incorporated under the laws of Canada or a Province whose shares are listed on a designated stock exchange in Canada in line with the Income Tax Act (the “ITA”);
  4. A person that owns residential property as trustee of a mutual fund trust, real estate investment trust and SIFT trust, as defined under the ITA;
  5. A registered charity, as defined under the ITA;
  6. A cooperative housing corporation, a hospital authority, a municipality, a public college, a school authority, a university, or a para-municipal organization, as defined under the Excise Tax Act.

Computation of tax payable under the UHTA

The tax payable is 1% of either the taxable value or fair market value (“FMV”) of the residential property prorated by the taxable person’s share of the property. Taxable value is the default value for calculating UHTA payable. However, a person subject to the UHTA may elect by no later than April 30 of the reporting year for UHTA to be calculated based on the FMV of the residential property. Taxable value is a technical term defined to mean a prescribed amount or the greater of an amount assessed as value of the property for property tax purpose or the most recent sale price of the property.

Exemptions from UHTA

The UHTA contains numerous exemptions. For the purpose of this article, the exemptions are categorized as: (i) exemption for primary place of residence, (ii) qualifying occupancy exemption, and (iii) general exemptions. The exemptions are discussed below.

Exemption for Primary Place of Residence:

Broadly speaking, this exemption appears to exclude from the UHTA, residential properties that do not meet the policy concerns of underutilization. Accordingly, the UHTA does not apply if the residential property is the primary place of residence of the owner, the owner’s spouse or common-law partner, or a child of the owner or the owner’s spouse or common-law partner. For the later, the child must occupy the residential property for the purpose of studying at a designated learning institution in Canada.

Elections for multiple properties:

If a person or their spouse or common-law partner are neither citizen nor permanent resident of Canada but own multiple residential properties, the primary place of residence exemption will be available only with respect to the residential property designated by the owner by an election process set out in the UHTA.

Qualifying Occupancy Exemption:

Similar to the primary place of residence exemption, the qualifying occupancy exemption appears to exclude properties that are adequately occupied and do not meet the policy concerns of underutilization. Accordingly, the UHTA does not apply if the “qualifying occupancy period” in respect of the property to the owner is 180 days or more.   The UHTA defines qualifying occupancy period as a period during which any of the following persons have continuous occupancy of a dwelling unit that is part of the residential property for at least one calendar month:

  1. an individual who deals at arm’s length with the owner and with any spouse or common-law partner of the owner who is given continuous occupancy of the dwelling unit under a written agreement;
  2. an individual who does not deal at arm’s length with the owner or with any spouse or common-law partner of the owner and who is given continuous occupancy of the dwelling unit under a written agreement and for consideration that is not below fair rent of the residential property;
  3. an individual who is the owner or the owner’s spouse or common-law partner, who is in Canada for work and occupies the property for that purpose;
  4. an individual who is a spouse, common-law partner, parent, or child of the owner and who is a citizen or permanent resident; or
  5. a person prescribed by the Minister of National Revenue (the “MNR”).

Accordingly, if any of the persons mentioned above occupy a dwelling unit in a residential property in a manner set out above for at least 180 days, the UHTA will not apply in respect of the property. The 180-day (or 6 months) qualifying occupancy requirement does not appear to be comprised of consecutive months. It appears that what is required under the UHTA is that occupancy must be at least a full month to be “qualifying occupancy period” but the six months (180 days) requirement to be exempt from the UHTA need not be consecutive.

The qualifying occupancy exemption has a further exclusionary rule that is worth mentioning. The exemption does not apply if the only individuals who have occupancy of a dwelling unit are the owners or a spouse, common-law partner, parent, or child of the owner and each of these individuals reside in another property for equal or greater number of days than they reside at the residential property.

General exemptions:

The general exceptions address residual policy considerations ranging from excluding private Canadian corporations that do not have substantial foreign ownership from UHTA to ensuring that persons who have legitimate reasons for underutilization are not subjected to the Act. Exemptions under this category include circumstances where:   

  1. the residential property is owned by a person in their capacity as a partner of a partnership that is a Specified Canadian Partnership or trustee of a trust that is a Specified Canadian Trust;
  2. the residential property is owned by a Specified Canadian Corporation;
  3. the property is not suitable for year-round use as a place of residence;
  4. the residential property is seasonally inaccessible because public access is not maintained year-round;
  5. the residential property is uninhabitable for at least 60 consecutive days as a result of a disaster or hazardous condition caused by circumstances beyond the owner’s control provided that this exemption was not relied on for more than one prior calendar year;
  6. the residential property is uninhabitable for a period of at least 120 consecutive days as a result of renovation to the property provided the work is done without reasonable delay and the exemption was not relied on for any of the nine prior calendar years; and
  7. the person becomes an owner of the residential property in the calendar year and was never an owner of the residential property in the prior nine calendar years.

Administrative and enforcement provisions under the UHTA

The UHTA contains very broad and extensive administrative and enforcement provisions. Given the scope of these provisions, this article only provides a high-level review of some of these provisions.

Returns Obligation:

Except for excluded persons, “prescribed persons” and “owners of prescribed properties”, a person that is an owner of one or more residential properties is required to file information returns as prescribed by the MNR. The obligations to file returns applies even if the owner of the residential property is exempted from UHTA on account of any of the exceptions discussed above. Returns are due April 30 of the filing year.


The UHTA contains an anti-avoidance provision which applies if a transaction is an avoidance transaction. If a transaction is an avoidance transaction, the tax consequences to a person must be determined as is reasonable in the circumstances to deny the tax benefits that would result from the avoidance transaction. Avoidance transaction is any transaction that would result directly or indirectly in a tax benefit unless there is reasonably justifiable bona fide purpose to the transaction.

MNR’s Power of Inquiry:

The MNR may appoint any person to conduct inquiries that may be necessary for the administration or enforcement of the UHTA.  If an inquiry is authorized, the MNR must apply to the Tax Court of Canada (the “TCC”) for a hearing officer. Witnesses in an inquiry are entitled to be represented by counsel. A person being investigated in an inquiry is entitled to be present and to be represented by counsel unless the hearing officer orders otherwise on grounds that it is prejudicial to the effective conduct of the inquiry. Application for exclusion of the person under inquiry or their counsel may be made to the hearing officer by the MNR or a witness.

MNR’s Audit and Inspection Powers:

In addition to the MNR’s power of inquiry discussed above, the UHTA vests on the MNR, the power to inspect, audit or examine records, processes, property, or premises of a person as necessary to determine their obligations under the Act.

Record keeping obligation:

Every person that has tax and return obligations under the UHTA is also obligated to keep all records necessary to determine the person’s liabilities and obligations under the Act. The general retention period under the UHTA is 6 years subject to exceptions. The exceptions to this rule are: (i) documents are to be retained until final disposition of objections and appeals where applicable, (ii) MNR can demand retention for any period, and (iii) MNR may authorize earlier disposal of records.


The MNR has the power to make assessments, vary assessments, reassess a person or make an additional assessment. The MNR is not bound by any return filed or information provided by person subject to the UHTA and may make an assessment despite information filed. This is similar to subsection 152(7) of the ITA which empowers the MNR to conduct net worth assessments.

There is a four-year period within which MNR may assess or reassess a person under the UHTA. The MNR may assess or reassess a person under the UHTA at any time if there is (i) misrepresentation caused by carelessness, neglect or willful deceit, (ii) fraud committed while filing returns, (iii) if no return is filed at all, (iv) if the MNR advances an alternative argument to uphold reassessment, and (v) if a person waives the four-year limitation period.


If a person subject to tax under the UHTA disputes an assessment or reassessment made by the MNR, the person may object by filing a Notice of Objection. Objections to assessment or reassessments must be filed within 90 days. Application may be made to the MNR to extend time to file objections up to a maximum of 1 year upon grounds set out in the Act (e.g. the person was unable to act or give mandate to a representative). If the MNR refuses to extend time or makes no decision within 90 days, the person assessed or reassessed may within 30 days apply to the TCC for extension.


An appeal may be filed at the TCC within 90 days following confirmation of the MNR’s assessment or reassessment or after 180 days has passed and MNR does not issue a decision. Time to appeal may be extended by an order of the TCC if an application is filed within a year and grounds similar to that of objections are shown in the application. The TCC may allow or vacate an assessment or refer same back to the MNR for reconsideration.


Failure to file returns attract a penalty of the greater of (i) $5000 for individuals and $10,000 for corporations; (ii) 5% of the tax payable; or (iii) 3% of the tax payable multiplied by the duration of months of default.

MNR’s discretionary powers to waive penalties and interests:

The MNR has the power to waive interest and penalties under the UHTA. This will likely be achieved through the Canada Revenue Agency’s Voluntary Disclosure Program and Taxpayer Relief program.


If a person files an objection or commences an appeal at the TCC in respect of an assessment or reassessment, no collection is allowed until 90 days after MNR’s notice confirming or varying the assessment or until a decision is rendered by the TCC. However, this does not apply if amount of unpaid tax exceeds $1,000,000. Where this is the case, the CRA may collect up to 50% of total tax owing.


As can be gleaned from the general overview of the UHTA above, the Act will impose significant tax and informational returns obligations on foreign owners when passed into law, unless they are exempted. As noted earlier, the current text of the UHTA states that the Act will retroactively take effect from January 1, 2022.  Therefore, it is imperative for foreign owners to proactively seek legal advice to be aware of their obligations under the UHTA. Foreign owners of residential properties in Canada are encouraged to consult our team of tax lawyers to discuss how the UHTA may impact their affairs.