Underused and Undepreciated: Taxing Underused Foreign-Owned Residential Property Nationwide
Posted in Real Estate

Over the last few months, the Underused Housing Tax Act (the “Act”) has moved through the House of Commons and is currently in the final steps of the report stage. If the Act is ultimately brought into force, it will implement an annual tax of 1% on the vacant or underused residential real estate, directly or indirectly owned by non-Canadians.

Whom does the Underused Housing Tax (UHT) target?

The UHT works on an exclusionary basis. If a person does not fit into one of the categories of an “excluded owner” then they are subject to the tax. Most non-citizens and non-permanent residents that own residential property in Canada, regardless of how that property is held directly or through a company, trust or partnership[1], will not meet the criteria of an excluded owner and thus will be subject to the tax.

What is the tax formula?

Individuals must calculate and submit a return to the Minister, payable on or before April 30th of the year. The UHT is equal to 1% of the assessed or fair market value of the residential property.[2] Non-excluded owners are required to file a return by April 30th of each year for the prior calendar year for each residential property that they own and make the required payment by April 30.

What constitutes an underused home?

The UHT only applies to residential property as defined in the Act.

The Act excludes from the qualifying occupancy period situations where the only individuals having continuous occupancy of a dwelling unit are the owner or a spouse, common-law partner, parent or child of the owner, if each of those individuals reside or lodges at a place other than the residential property for an equal or greater number of days than they reside or lodge at the residential property.[3]

What exceptions are available for non-excluded owners?

The Act contemplates multiple exceptions. The most common exception is property that is the primary place of residence of the individual, spouse or common law partner.

Some notable situations where the UHT is not payable include:

  • The residential property is not suitable for year-round use as a place of residence;
  • The residential property is seasonally inaccessible because public access is not maintained year-round;
  • The residential property is uninhabitable for a period of at least 60 consecutive days in the calendar year as a result of disaster or hazardous conditions;
  • The residential property is uninhabitable for a period of 120 consecutive days as a result of renovation to the residential property and the work is carried on without unreasonable delay, and this exception did not previously apply within the last nine prior calendar years;
  • The person becomes an owner of the residential property in the calendar year and was never an owner of the residential property in the nine prior years;
  • The person died during the calendar year or prior calendar year;
  • The person is the personal representative in respect of a deceased individual who was an owner of the residential property during the calendar year or the prior calendar year and was not otherwise an owner in either of those years;
  • The construction of the residential property is not substantially completed before April of the calendar year;
  • The construction of the property is substantially completed after March of the calendar year, the property is offered for sale to the public during the calendar year and the residential property has never been occupied by an individual as a place of residence or lodging during the calendar year;


The Act contains a comprehensive administrative and enforcement scheme that utilizes many of the same instruments applied in the Income Tax Act (the “ITA”), such as General Anti-Avoidance Rules, assessment and objection procedures, as well as statutory rights of appeal.

How will the UHT apply concurrently with B.C.’s Speculation and Vacancy Tax and Vancouver’s Empty Homes Tax?

Compared to B.C.’s Speculation and Vacancy Tax (the “SVT”) and the Vancouver Empty Homes Tax (“EHT”), the ambit of the UHT is narrower and applies only to non-Canadians.

Non-Canadian owners in B.C. that are currently subject to the SVT and/or the EHT should plan and prepare for an additional 1% tax, as well as the additional administrative efforts that come with calculating, declaring and filing this amount each year.

[1] See definition of “specified Canadian corporation”.

[2] See 6(3)

[3] See section 6(2)

  • Ben  Westerterp

    Ben is an associate in the Mining and Real Estate Groups at the Vancouver office of Lawson Lundell. He assists clients on a broad range of commercial and project development matters in the commercial real estate and natural resource ...

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