Are Your Rental Units “Condos”? Register with CRA or Face Fines!
The Underused Housing Tax Act (the “HTA”) requires Condo Corporations to register (using CRA form UHT-2900) each corporate owned condo unit with CRA. Under the HTA the filing deadline for the 2022 registration was April 30, 2023; however, if you miss the deadline but file by October 31, 2023 then you will avoid the fines and penalties otherwise payable for missing the deadline.
In cities outside Toronto, it was common over the past few decades to convert multi-res apartment buildings to condo status or to develop new rental buildings with condo tenure because of the property tax savings flowing from the conversion from the multi-res tax rate to the res tax rate. The buildings continued to operate as rentals but enjoyed a property tax savings. As time has gone on, the variance between the multi-res and res rates in many cities has diminished but the condo status of each “rental unit” remains. Under the HTA, each condominium unit is considered a “residential property” and therefore the condo corporation must file a separate return with CRA.
The filing requirements of the HTA extend to “persons” (other than “excluded owners”) who own rental property and while the list of “excluded owners” is long, the following “affected owners” are in our view required to register:
* an individual who is not a Canadian citizen or permanent resident;
* an individual who is a Canadian citizen or permanent resident and who owns a residential property as a trustee of a trust (other than as a personal representative of a deceased individual);
* any person – including an individual who is a Canadian citizen or permanent resident – that owns a residential property as a partner of a partnership;
* a corporation that is incorporated outside Canada;
* a Canadian corporation whose shares are not listed on a Canadian stock exchange designated for Canadian income tax purposes (ie: a condo corporation); and,
* a Canadian corporation without share capital.
Note that if there are two or more “affected owners” of a residential property on December 31st of a calendar year, each of them must file a separate return for the residential property for the calendar year (see UHTN3 form dated January 2023 Filing a Return and Paying the Underused Housing Tax – Canada.ca
If an affected owner fails to file a return for a residential property (i.e. each condominium unit) for a calendar year by April 30th of the following calendar year, the affected owner must pay a penalty that is the greater of the two following amounts:
* $5,000.00 for affected owners who are individuals or $10,000.00 for affected owners that are not individuals (i.e. corporations);
* The amount that is the total of the following:
* 5% of the underused housing tax payable for the residential property for the calendar year; and,
* 3% of the underused housing tax payable for the residential property for the calendar year multiplied by the number of complete calendar months that the return is past due.
In addition to the penalties, the affected owner will also have to pay any underused housing tax and interest due.
Bottom line: if you operate a res property and the owner of that property is an “affected owner” for the purposes of the HTA, then registration requirements arise. Where registration is delegated to Property Management companies by affected owners, a review of their agreements is warranted to determine how best to incorporate the added administrative costs of registration into their third party management agreements.
Laura Gurr is a partner with Cohen Highley LLP in London, Ont. Cohen Highley has offices in London, Kitchener, Chatham, Sarnia, Stratford and Strathroy. Laura provides risk management and regulatory compliance advice to condominium corporations, property management companies and non-profit housing providers.
Kevin Kok is an associate with Cohen Highley LLP in London, Ont. Cohen Highley has offices in London, Kitchener, Chatham, Sarnia, Stratford and Strathroy. Kevin provides risk management and regulatory compliance advice to condominium corporations, property management companies and non-profit housing providers.