On September 23, 2024, the government tabled a Notice of Ways and Means Motion to introduce a bill entitled An Act to amend the Income Tax Act and the Income Tax Regulations. This Notice of Ways and Means Motion modified the motion tabled on June 10, 2024. For more information about the capital gains tax changes, please visit the Notice of Ways and Means Motion.

 

Although these proposed changes are subject to parliamentary approval, consistent with standard practice, the Canada Revenue Agency (CRA) is administering the changes to the capital gains inclusion rate effective June 25, 2024, based on the proposals included in the Notice of Ways and Means Motion tabled September 23, 2024. Parliamentary convention dictates that taxation proposals are effective as soon as the government tables a Notice of Ways and Means Motion; this approach provides consistency and fairness in the treatment of all taxpayers.

 

The CRA will issue the forms to allow taxpayers to file in accordance with the new capital gains rules by January 31, 2025. Arrears interest and penalty relief, if applicable, will be provided for those corporations and trusts impacted by these changes that have a filing due date on or before March 3, 2025.

 

When Parliament is prorogued, or dissolved, the CRA will generally continue to administer proposed legislation consistent with its established guidelines.

 

Upon resumption of Parliament, if no bill is passed in the House of Commons, and the government signals its intent to not proceed with the proposed measures, the CRA would cease to administer them. If this scenario described were to materialize, the CRA will be ready to support taxpayers in ensuring any corrective reassessments of implicated returns are processed.

Based on the Fall Economic Statement, on November 21, 2023, under the proposed changes to the Underused Housing Tax (UHT), for the 2022 reporting period, non-excluded owners of residential properties in Canada must file a UHT return by April 30, 2024, or face a minimum penalty of $1,000 for individuals and $2,000 for affected corporations, rather than $5,000 and $10,000 as previously announced.  See our previous blog for more information pertaining to the UHT filing requirements.

 

However, for the 2023 reporting period, specified Canadian corporations, specified Canadian partnerships, and specified Canadian trusts meeting certain conditions will be considered excluded owners and exempt from filing a UHT return.

 

Please consult with your tax preparer for more information.

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March 29, 2024

Effective January 1, 2022, the Canada Revenue Agency introduced the Underused Housing Tax (UHT).

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HIGHLIGHTS

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1.Annual 1% Tax: The UHT is an annual federal tax of 1% on the ownership of vacant or underused housing in Canada.​

 

2. Affected Owners: Certain Canadian owners of housing may be required to file an annual return and pay the UHT. For instance, if your name is on the title of a residential property, but you do not have beneficial ownership, you must file the UHT return.

 

3.Excluded Owners: The majority of Canadian owners of residential property are excluded owners and may not have obligations under the UHT.​

 

4.Filing Deadline: The deadline for annual filings is April 30, with penalties for late filings. The cutoff for penalties related to 2022 filings is extended to April 30, 2024.​

 

5.Penalties: Failure to file on time may result in a minimum penalty of $1,000 for affected owners who are individuals or $2,000 for affected owners who are not individuals such as a corporation or trust​

 

6.Property Holding Structures: Canadians may unknowingly hold property through partnerships or trusts, affecting their UHT obligations. For example, parents who were added to the title of their adult child’s home because they co-signed the mortgage could be considered to hold that property in trust. The same might apply to a person who holds title to their aging parents’ home, a common arrangement that can simplify the process of transferring a property when one’s parents die. 

 

We strongly recommend reviewing your property holdings and assessing whether you fall under the UHT requirements. If you have questions or concerns, please don't hesitate to reach out to us. Additionally, consulting with your lawyer or advisor can provide valuable insights.

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Stay informed and let us know how we can assist you in navigating these changes effectively.