What Credit Unions need to know about the Underused Housing Tax

The Government of Canada announced its intention in the 2021 Federal Budget to implement a national one percent annual tax on the value of residential real estate owned by any non-resident, non-Canadian that is considered vacant or underused. Rules for the Underused Housing Tax (UHT) were enacted on June 9, 2022, and apply to residential properties owned on or after December 31, 2022.

More details of this tax and its impacts can be found in this MNP Tax Alert.

UHT Considerations for Investment and Foreclosed Property

How the UHT applies to your credit union? Some credit unions own residential property.

A typical example would be a credit union that owns a residential home that it offers for employees to rent. This would be classified as investment property in accordance with International Financial Reporting Standards (IFRS).

In addition, credit unions and other financial institutions also may own residential property through foreclosures, classified as foreclosed property in accordance with IFRS. 

Are credit unions exempt from UHT?

Credit Unions should be able to claim an exemption from the one percent UHT as a “specified Canadian corporation,” provided certain rules are met. Each credit union should review their circumstances to ensure this exemption applies, as other exemptions may also be available.

However, unless a property owned by a credit union as of December 31 is not considered a “residential property” for UHT purposes, credit unions will have to file a UHT return (Form UHT-2900) for each property by April 30 of the following year. Residential properties may include detached homes or buildings with less than four dwelling units. The due date to file the 2022 UHT return is May 1, 2023 (as April 30 falls on a Sunday).

There is currently no exemption to the reporting rules for property a credit union has acquired through a seizure or foreclosure.

What are the impacts of non-compliance?

The minimum penalty for failing to file a UHT-2900 with the Canada Revenue Agency (CRA) is $10,000 per return for corporations.

If your credit union owned residential properties, either as an investment property or foreclosed assets, on December 31, 2022, you must complete and file the UHT-2900 for each property. A copy of the required filing can be found on the CRA website.

Contact us

If your credit union requires assistance with the filing of Form UHT-2900 or requires support as it relates to the UHT, please reach out to your local MNP Credit Union advisor or contact Matt Bolley, Credit Union Tax Lead, at [email protected].