UHT tax news for non-Canadian cottagers

New ‘Underused Housing Tax’ is bad and good news for cottage owners who live outside Canada

First the bad news: The Canadian government just enacted a new tax on foreign-owned properties, designed to prevent speculation in vacant (or “underused”) Canadian housing. The UHT amounts to 1% of the property value, every year. Yikes!

Now the good news: If you own a seasonal cottage in Canada, i.e. one that you can’t use for over half the year, then it is EXEMPT from the new tax. That would include all water-access properties in Bayfield-Nares. Whew!

Now the “hassle-factor”: Even though you’re almost certainly exempt from the UHT, you still need to apply for exemption from the tax (it’s not automatic), and doing so involves the rather complicated two-step process, described below. Groan!

Who does the UHT apply to? It applies to property owners who live outside Canada and aren’t Canadian citizens. If you fall into both these categories, you won’t owe any tax (but you must file annually to claim your exemption).

Time is of the essence—Apr. 30 deadline

If you’re a non-resident property owner, you should move quickly on this! The application for exemption is due by April 30, every year (including this year).

To complicate matters, many non-resident cottagers will have to first apply for a Canadian Individual Tax Number,which they’ll need to complete the UHT form. You only need to do this once, but the application must be MAILED along with supporting documents (passport or driver’s licence).

The penalties for failing to file a UHT are stiff, starting at $5,000. More about that here.

How to apply for the UHT exemption and file your first return with the Canadian government

Here’s a guide to the procedure, with links to the relevant websites and application forms, plus a detailed overview of the UHT prepared by the Georgian Bay Association, to which you belong through the BNIA:

• Step 1: If necessary, complete the Application Form for an Individual Tax Number (a relatively simple two-page form) and submit it by mail
• Note: You don’t need to apply for an Individual Tax Number if you have a Canadian Social Insurance Number (i.e. if you were born or have worked in Canada you may have an SIN you can use)
• Step 2: Complete the Application Form for the Underused Housing Tax (a complicated nine-page tax form, making the exemption claim on lines 630 or 635 on page 5) and submit it electronically or by mail
• Note: with a water-access property, you won’t have a Canadian postal code to use on the UHT form. DON’T use the general Pointe au Baril postal code, just leave that field blank (see the next link for details)
• Summary of the UHT from the Georgian Bay Association
• Here’s an overview of the UHT from the Government of Canada

Getting professional help with your UHT return

This enewsletter is intended as general information for BNIA members. However, the Association doesn’t provide tax, legal or accounting advice and we accept no legal liability for the contents of this post.

Foreign owners of Bayfield-Nares cottages may want to contact their own accountants, bookkeepers or lawyers for advice this year, in your first application for the UHT exemption. For further information about the new tax, you can direct your professionals to the Chartered Professional Accountants of Canada and to the Government of Canada link above.