The Underused Housing Tax is being eliminated

The Underused Housing Tax (UHT) is a 1% annual federal tax on the value of vacant or underused residential property, aimed mainly at owners who are not Canadian citizens or permanent residents.

Budget 2025 proposed eliminating the UHT as of the 2025 calendar year. Under the proposal, no UHT would be payable and no UHT returns would be required for 2025 or later years.

What still applies

All UHT rules continue to apply for the 2022, 2023 and 2024 calendar years, including penalties and interest for returns not filed or tax not paid. If you may have missed a UHT filing for those years, it is worth addressing now.

Planning considerations

The proposed elimination of the Underused Housing Tax does not necessarily resolve outstanding compliance obligations for earlier years.

Corporations, trusts, partnerships, and individuals who held Canadian residential property during 2022 to 2024 should consider whether they were affected owners in any of those years. A filing obligation may have existed even where no tax was ultimately payable.

Particular attention should be given to properties held through private corporations, nominee arrangements, and certain trusts, where ownership structures may create reporting requirements that are not immediately apparent.

Reviewing historical ownership and filing obligations can help identify outstanding returns, available exemptions, and potential exposure to penalties and interest.