The Canada Revenue Agency (CRA) has waived nearly $2.5 billion in interest and penalties related to the underused housing tax (UHT) imposed on vacant and underused homes owned by foreign nationals.
The UHT, effective since 2022, charges an annual tax of 1% on residential properties owned by foreign individuals that are left vacant or underused, aimed at increasing housing availability. Initially, its complex reporting requirements caused confusion among many Canadians, prompting the CRA to offer relief for late filers.
In response to the complications, the government eliminated filing obligations for Canadian homeowners and corporations for the 2023 tax year. Despite this, the interest and penalties waived for 2022 totaled almost $2.5 billion, significantly surpassing the $49 million collected from the tax in the fiscal year 2023-24.
Tax experts criticized the UHT's initial design, noting that it imposed steep penalties for non-compliance on Canadian taxpayers who would not owe any money to the government. John Oakey, vice-president of taxation at Chartered Professional Accountants of Canada, remarked that the waived penalties indicate widespread confusion among taxpayers.
The UHT also required many Canadians owning homes through trusts or partnerships to file special tax returns, complicating compliance. Initially, penalties for late filings started at $5,000 for homeowners and $10,000 for corporations, later reduced to $1,000 and $2,000, respectively.
To assist taxpayers, the CRA extended the deadline for submitting 2022 UHT returns multiple times, ultimately allowing filings until April 30, 2024. The $2.5 billion figure represents waivers for over 531,000 filings, with an average waiver of approximately $4,600.
The total UHT revenue collected in the fiscal year 2023-24 pertains to both the 2022 and 2023 tax years. The CRA reported spending around $59 million to implement and administer the tax, alongside over $900,000 on advertising to raise public awareness.