Underused Housing Tax (federal)
The federal UHT is 1% per year on residential properties held by non-citizens / non-residents that are vacant or underused. Most Canadians are exempt but must file the UHT return if affected.
Your scenario
Result
The taxable value is the greater of CRA assessed value or most recent sale price (or fair market value if elected). Filing requirement applies even if exempt — penalties for non-filing are steep.
What the Underused Housing Tax actually is
The federal UHT is a 1% annual tax on residential properties owned by non-Canadians that are vacant or underused. Introduced in the 2022 federal budget and effective for the 2022 tax year onwards, it's administered by CRA via the UHT-2900 return.
The official intent: deter foreign capital from buying Canadian homes and leaving them empty. The practical effect: an ongoing 1% drag for non-resident owners on top of provincial and municipal vacancy taxes.
The filing trap — most people don't actually owe but still have to file
Originally, the UHT return had a much broader scope — applying to many Canadian citizens and PRs holding property through trusts, corporations, or partnerships. After backlash, CRA relaxed the filing rules for 2023 forward: many Canadian owners no longer need to file. But the rules are nuanced:
- Canadian citizens or PRs holding property personally: typically no filing required
- Canadian-controlled private corporations holding residential property: filing rules apply but most qualify for exemption
- Trusts and partnerships: filing rules apply but exemption pathway exists
- Non-resident owners: must file annually and prove exemption or pay
Common UHT exemptions
- Primary place of residence of the owner, spouse, common-law partner, or child
- Qualifying occupancy — property rented 180+ days/year to an arm's-length tenant under a written lease
- Newly constructed property not yet substantially completed
- Uninhabitable for 60+ consecutive days due to disaster or hazardous conditions
- Seasonal use only — vacation property in a non-urban area
- Death of owner — estate has a grace period
Penalties for not filing
Even if you owe $0 in UHT, missing the filing deadline triggers significant penalties:
- Individuals: minimum $1,000 per property per year
- Corporations, partnerships, trusts: minimum $2,000 per property per year
- Plus interest on unpaid amounts
These penalties have been reduced from the original schedule but remain substantial — material enough that filing on time matters even for clear-cut exemption cases.
How UHT stacks with other vacancy taxes
The federal UHT stacks on top of provincial / municipal vacancy taxes — they don't cancel each other:
- Federal UHT (1%) + BC SVT (2%) + property tax = ~3.5% annual recurring cost for a foreign-owned vacant Vancouver home
- Federal UHT (1%) + Toronto VHT (3%) + property tax = ~4.5% annual recurring cost for a foreign-owned vacant Toronto home
For a $1.5M property, that's $50,000–$70,000 in annual taxes if it sits empty under foreign ownership.
How to determine your filing requirement
CRA publishes a UHT decision tree on canada.ca. The short version: if you're a Canadian citizen or PR holding residential property in your personal name, you almost certainly don't need to file. Outside that simple case, get a Canadian accountant's advice before the April 30 deadline.