As with all advice, please check with your accountant to ensure these findings are relevant to your situation and we don’t take responsibility for actions based on these findings. You are welcome to use this as a starting point to continue your research and education but not as the letter of the law.
The Federal Government has created and implemented a new tax for those who own residential property as of December 31st, 2022 in a corporation, partnership, or a trustee of a trust. The name is deceiving and all owners who fall under the UHT definitions and requirements MUST file this report by April 30th, 2023 or face a large penalty per property for NOT filing. If you owe then enjoy paying 1% of the greater of the assessed or recent sale value.
Oh, your accountant and lawyer may not even know about this!
UHT: A NEW TAX
A NEW TAX FOR RESIDENTIAL PROPERTY OWNERS THAT EVEN YOUR LAWYER AND ACCOUNTANT MAY NOT BE FULLY AWARE OF!
Most Canadian-owned corporations, partnerships, and trusts are likely exempt from paying the tax but will likely need to file this return either way.
These notes are for companies, partnerships, and trusts that are 90% or more Canadian-owned. If you own a qualifying residential property under your personal name and there is a beneficial owner that is not you – that may be assumed that the property is held as a trustee of a trust and you must file.
If your property is a residential property (there is a dwelling that someone can live there or is substantially complete and someone can live there soon) then consider if it can be searched via Land Titles as it being owned by a corporation, partnership or trust and/or in the Land Owner Transparency Registry it was filed as a corporation, partnership or trustee of a trust then FILE.
UHT APPLICATION
9 PAGES OF FUN YOUR ACCOUNTANT MAY NOT KNOW HOW TO FILE
The form itself is confusing. It takes up to 3 days for CRA to answer an inquiry or call back. Since we asked before the busy tax season phone rush we were surprised that it took so long to get a response. When we called the first 3 representatives could not answer any of our questions. Three days later we eventually received a call back.
We felt that if our team of accountants were confused then we should share this new knowledge to ensure our community of developers, realtors and other real estate specialists avoid penalties and fines.
OVERALL, THIS IS WHAT HELPED US DETERMINE IF WE NEEDED TO FILE
As of December 31st, 2022 did you own residential property where someone can live in or was substantially complete where someone could live there soon? AND is this property owned within a corporation, partnership or is a trustee of a trust; then you MUST file.
TO FILE, OR NOT TO FILE
THAT IS THE QUESTION.
If searched on land titles, would your property appear that it is owned by a corporation, partnership, or is a trustee of a trust? – YOU MUST FILE.
Do you have a trust associated with your property? Did you file a trust associated with the transparency report? – YOU MUST FILE.
Land with no dwelling or the dwelling is not considered substantially complete, then do not file. The intention of the filing is to capture ownership details of residential dwellings. Especially, foreign ownership.
WHEN THERE IS TENANTS
We are a specified Canadian Corporation as our shareholders are all Canadian. We own a residential dwelling where someone can and does live in and it is rented to an arm’s length tenant who pays fair market rent. Based on this situation, this property earns an exemption in Part 5 under box 510.
WHEN THERE IS A SPECIFIED CORP
In the above situation, we own qualifying residential property under a Canadian Corporation so we must file, but because we are a specified Canadian corporation, we earn an exemption under Part 6 box 605 and 625.
While filling out the form you will need to specify ownership details, purchase price, assessment price etc. The price details is to ‘help’ calculate the tax but if you have an exemption you still need to fill out the information but can avoid Parts 7 and 8.
Once you determine you have an exemption, you can jump to Part 9 and sign and submit the form.
FINAL THOUGHTS
In the appendix are definitions and links that we found helpful to navigate around the form. There are a few odd questions and considerations that we enjoyed researching. Do reach out to your accountants to ensure you understand your filing requirements and don’t miss this deadline. This information is based on our in-house research and interpretations, we don’t take any assurances on the completeness of this information. Do seek professional legal and accounting advice.
Land ownership is complicated, Azure Properties Group can navigate your property development journey. Contact us to learn how we can create communities together.