Underused Housing Tax: why corporations get caught

The Underused Housing Tax was aimed at foreign owners of empty Canadian homes. But its filing rules swept in many Canadian owners who owed nothing — most often small corporations.

What the Underused Housing Tax actually is

The Underused Housing Tax (UHT) is an annual 1% federal tax on vacant or underused housing in Canada, in effect since January 1, 2022. The CRA says it applies mainly to foreign national owners, but also to certain Canadian partners, trustees and corporations. The tax aimed at one group; the reporting net caught a larger one.

Filing and paying are separate questions

This is the mechanism that trips people up. The UHT applies two independent tests:

• Are you an affected owner? If yes, you file a return for the property. Every affected owner files.
• Do you qualify for an exemption from the tax? If yes, you file the return and pay nothing.

Being exempt from the tax does not exempt you from the return. Ownership is tested on December 31 and returns are filed per property, so an affected owner of three properties files three, and affected co-owners file separately. Only an excluded owner, generally a Canadian owner of residential property, escapes both.

Why corporations were the ones caught

A Canadian citizen or permanent resident owning a house personally has almost always been an excluded owner. A corporation was not, nor was a partner of a partnership or a trustee of a trust. Hence the typical surprised filer:

• A small operating or holding company that happens to own a house, duplex or condo.
• A family that put a rental property inside a corporation for liability or estate reasons.
• Co-owners in circumstances that might be characterized as a partnership rather than simple co-ownership.
• Anyone holding registered title for somebody else — the classic bare trust arrangement.

What changed, and why the year matters more than the rule

On June 20, 2024, Bill C-69 amendments to the Underused Housing Tax Act received Royal Assent. Per the CRA, from the 2023 calendar year most Canadian owners of residential property need not file or pay. The changes:

• More Canadian owners were brought inside the definition of excluded owner — the change that removed most accidental filers.
• An additional exemption category was added for employee accommodations.
• Vacation properties were added to the exemptions to which an adjusted penalty calculation may apply.
• Reaching back to 2022, the original minimum penalty was reduced and certain residential condominium units were removed from the definition of residential property.

So a corporation’s position can differ between 2022 and later years with no change to the property. Reconstruct each year separately.

Deadlines and penalties, with a caution

The due date to file, make elections and pay for a calendar year is April 30 of the following calendar year. The CRA currently publishes minimum late-filing penalties of $1,000 for an individual affected owner and $2,000 for a corporation, with a further adjustment where an affected owner claiming certain exemptions has not filed by December 31 of the following year. Treat those figures as a reason to file on time rather than as settled numbers — the minimum has already been reduced once by amendment.

Provincial and municipal vacancy taxes are separate

The CRA is explicit that provincial and municipal vacancy taxes are different taxes, implemented by different governments, and that exemption from one does not exempt an owner from another. In British Columbia a property can sit inside more than one vacancy regime at once.

What to actually do

• List every residential property held, and identify the capacity in which it is held on December 31 of each year in question.
• Test excluded-owner status for each capacity and year against the rules as they stood then.
• If an affected-owner conclusion appears, determine whether an exemption applies, and file regardless.
• Keep the analysis inside your record retention system rather than in somebody’s memory.

If a return should have been filed and was not, that is a correction question. The Voluntary Disclosures Program exists for taxpayers who want to fix the record first, and timing matters most.

The bottom line

The UHT is a small tax with a large compliance footprint: it split filing from paying and defined filers by legal form. If residential property sits in a corporation or trust you control, ask whether you must file for this year, in this capacity. Rental property held through a company belongs on the real estate investor side of your file.

This article is general information, current as of July 2026. It is not tax, legal or accounting advice and creates no client relationship. Rules change and situations differ, so speak with a CPA before acting on it.