Is Your Condominium Corporation Facing a $10,000 Penalty Under the Underused Housing Tax Act?
From the CCI Review 2022/2023-3 March 2023 issue of the CCI London Chapter
In this article I am only focusing on the impact on residential dwelling units owned by Condominium Corporations.
A residential dwelling unit is one that contains private kitchen facilities, a private bath and a private living area. (i.e. Superintendent unit and possibly guest suites)
On June 9, 2022, rules for the Underused Housing Tax (UHT) Act were enacted, for 2022 these rules apply to residential properties owned on December 31, 2022. Unless the legal owner of a residential dwelling unit is an excluded owner, a UHT return must be filed by May 1, 2023 (extended as April 30th is on a Sunday). If it is determined that the owner must file a return, there are several exemptions that may exempt the owner from paying the Underused Housing Tax.
Most Condominium Corporations, unfortunately, are not excluded owners and will be required to file a UHT return by April 30th, since under the UHT Act, corporations that are incorporated without share capital and are not registered charities or a cooperative housing corporation do not meet the definition of an excluded owner.
If a Condominium Corporation owns a qualifying residential dwelling unit, it must file its UHT return by April 30 or face a minimum penalty of $10,000. These are some significant penalties even though the corporation may be exempt from the UHT but not exempt from filing the UHT return.
Once it is determined that your Condominium corporation is required to file a UHT return, filing will allow you to possibly claim one of these available exemptions that may exempt your Condominium Corporations from paying the 1% UHT on residential dwelling units it owns, they are as follows:
- Specified Canadian Corporation exemption – applicable in respect to a calendar year, where the corporation is incorporated in Canada or a Province without share capital and on December 31st of the calendar year it has:
i) a chairperson or other presiding officer who is a Canadian citizen or a permanent resident, or
ii) more than 90% of its directors are Canadian citizens or permanent residents.
- Qualifying Occupancy Test - The residential dwelling unit is occupied in periods of at least one month at a time for at least 180 days in the calendar year by a person that is renting the dwelling unit, is paying fair rent with a written contract.
- Newly Constructed Property/Under renovation – A residential dwelling unit is exempt for a calendar year if the unit was not substantially completed by April of that year or was not habitable for 120 consecutive days during the calendar year due to renovations.
- Property not Suitable for year-round occupation – this can be due to limitations on access or residence not being suitable for four season occupation.
- Uninhabitable Condition – if the unit was uninhabitable due to disaster or hazardous conditions for at least 60 consecutive days in the calendar year being reported.
If your Condominium Corporation has or possibly has a residential dwelling unit, gather as much information about the unit in question, including property tax bill and contact your accountant for further information to determine if your corporation needs to register and file a return by May 1, 2023 to avoid the $10,000 penalty for not filing on time.
Note: this article was forwarded by email (March 13, 2023) to board-managed to corporations that we have on file as members of CCI London & Area Chapter; managers where we have email addresses so they may attend to the corporations under their management and posted on social media.
For more information, you can review the Underused Housing Tax Act here.
Michael Watson, CPA, CA, LPA is a partner in accounting and assurance at Davis Martindale LLP. His practice is focused on audits, and reviews of clients ranging from small owner-managed businesses to large corporate groups in manufacturing, construction and service industries, as well as not-forprofit organizations, condominiums and municipalities.
Michael’s membership with CCI began in 2013. His amazing positive response to the invitation to stand and then to be elected to the CCI Board in 2016 was awesome. He has served as Treasurer of the chapter since, a task that takes expertise and he has it.
His generosity of time, expertise and management of all aspects of CCI as a non-profit organization has been so valuable to the chapter and will continue to be. His presentations on financial reporting and budgeting during the condominium course and as a panelist during seminars have been essential.
DISCLAIMER, USE INFORMATION AT YOUR OWN RISK
This is solely a curation of materials. Not all of this information is created, provided or vetted by CCI. Some of the information is only applicable to certain provinces. CCI does not make any warranties about the reliability or accuracy of any information found in the materials on this website. The information is not updated to reflect changes in legislation or case law and therefore may not always be current and up-to-date. We suggest you seek professional advice with respect to your specific issues or regarding any questions that arise out of the material. We will not be liable for any losses or damages in connection with the use of any of the material found on the website.