Proposed changes to underused housing tax should remove UHT pain for most farms

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Editor’s note: This story was updated Nov. 28 after confirmation from the Canada Revenue Agency that the proposed changes to the underused housing tax will only take effect after legislation that has yet-to-be introduced has been approved by Parliament.

The federal government has proposed several changes to its underused housing tax (UHT) that are expected to reduce the administrative burden and cost on farms across the country.

The UHT — a 1 per cent annual tax on the value of a home that’s deemed to be underused — was introduced in the 2021 federal budget and took effect in 2022, with government’s intent being that it would alleviate pressure on housing supply and discourage foreign ownership.

Even if a home is lived in and the tax doesn’t apply, most Canadian corporations, partnerships, and trusts — including many farms — are currently required to submit an annual UHT form for every residential property they own. Failing to file a UHT return can result in fines from the Canada Revenue Agency of $5,000 for individuals and $10,000 for corporations, per property.

As part of Finance Minister Chrystia Freeland’s fall economic statement this week, the government proposed a change that would exempt corporations and partnerships that are Canadian-owned from filing the UHT form starting with the 2023 calendar year. (Forms must still be submitted for 2022 by April 3o, 2024.)

This change “pretty much fixes the problem for a large number, if not all, farm-related entities in Canada, among other groups,” explained Stuart Person, MNP’s Senior Vice President of Agricultural Services, joining the RealAg Radio Issues Panel on Friday.

Person still recommends working with an accountant to ensure a corporation, partnership, or trust meets the criteria for the exemption. “But for the most part, our farming clients and our farmers across Canada will now be exempt from filing for 2023,” he said. “They do still have to file for 2022.”

As for the penalties, the government is proposing to reduce the fees for not filing a UHT form to $1,000 for individuals and $2,000 for corporations, which would apply retroactively starting in 2022.

The government has also indicated it wants to offer a UHT exemption when residential properties are used as accommodations for employees, as long as the property is located outside of a city that has 30 thousand or more residents.

The Canada Revenue Agency has confirmed the changes will require legislation to be approved by Parliament before they take effect. The UHT rule updates will likely be part of a larger omnibus bill to implement measures that were announced in the Fall Economic Statement, similar to a federal budget bill.

The government is inviting feedback on the proposed changes (by emailing [email protected]), with a deadline of January 3, 2024.

Related:

Filing deadline for the Underused Housing Tax extended to April 30

Farm groups call for exemption to filing Underused Housing Tax forms

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