Canada: Penalty, interest relief for late-filed underused housing tax returns

The CRA announced that it will waive penalties and interest for any late-filed underused housing tax returns.

Penalty, interest relief for late-filed underused housing tax returns

Owners of residential property in Canada now have additional time to meet new tax filing obligations under the underused housing tax (UHT) rules. Although affected owners must file a separate UHT return and pay any related UHT by 30 April 2023 for each reportable residential property they owned on 31 December 2022, the Canada Revenue Agency announced that it will waive penalties and interest for any late-filed UHT return and for any late-paid UHT, provided the affected owner files any required returns and pays any related UHT by 31 October 2023. Read TaxNewsFlash

Generally, certain Canadian private companies and individuals, as well as non-resident, non-Canadian owners, have to file an annual return for specific types of residential property they own, and also determine whether they are liable for a 1% annual UHT on that property.

KPMG observation

Although this announcement provides some welcome relief in light of the fast-approaching deadline for the 2022 taxation year, affected residential property owners need to continue to act quickly to comply with these rules so they do not face significant penalties, even where a return is required, but no tax is ultimately payable. In particular, entities need to identify all affected owners in their structures who owned reportable residential property on 31 December 2022 and assure these owners prepare a separate UHT return for each reportable residential property and, unless they meet an available exemption, pay any related UHT.

Many property owners may be surprised to find they have a filing (and potentially a payment) obligation under these rules, such as private Canadian corporations (including bare trustee corporations and subsidiaries of public corporations, real estate investment trusts (REITs), registered charities and public sector entities) and Canadian individuals that own reportable property as a trustee of a trust or as a partner of a partnership.

Read a March 2023 report [PDF 185 KB] prepared by the KPMG member firm in Canada


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