No Requirement For Most Members to Complete Taxable Value Lines

In the interpretation letter from CRA to CHBA, it states: “the CRA position is that a person is not required to report the amounts on Lines 280 and 285 of the UHT-2900 return with respect to the taxable value of the residential property in situations where both of the following conditions are met:

• No tax is payable in respect of the residential property for a calendar year due to the person’s ownership of the residential property being exempt from the UHT for the calendar year; and
• The person files the UHT-2900 return by December 31 of the following calendar year. For example, the return for the 2022 calendar year is filed by December 31, 2023.” [CHBA note: despite the confusing nature of this line, the deadline for filing is still April 30 – see below.]

Therefore, for members that are exempt from paying the tax due to their ownership structure (e.g. Specified Canadian Corporations, Specified Canadian Partnerships, Specified Canadian Trusts), they are not required to report on Line 280 (assessed value) and Line 285 (sale price).

For completing the forms electronically, CRA has confirmed that a value of ZERO (0) can be put in lines 280 and 285 by builders-developers who do not have a property assessment notice at the time of the UHT-2900 return filing date. The CRA will be publicly announcing this position shortly.

Note that to be eligible to report zero for Lines 280 and 285, the return must be filed by December 31; however, penalties for late filing begin April 30, so members should still file by April 30, which, while still inappropriate red tape, will now be much less work.

This interpretation secured by CHBA will dramatically reduce the level of effort for completing the returns, enabling members to simply enter the company information, the address of the unit, check their appropriate exemption box, and complete their election. While a return must still be filed for each unit (and CHBA continues to seek a complete exclusion for industry for this), this is a substantial win for the Association and its members, under the circumstances, in terms of time and cost savings for filing for this year.

Clarity on Substantial Completion

Regarding clarity on substantial completion, according to discussions with the Canada Revenue Agency, and confirmed via the CRA interpretation letter received by CHBA, the CRA considers a property to become a residential property for UHT purposes “when construction of the property is substantially completed (generally, 90% or more) so that an individual could reasonably inhabit the property.” CRA goes on to note that “a residential property may be considered to be substantially completed even if there are outstanding minor repairs, adjustments or upgrades, since this will not reasonably impair the use and enjoyment of the property as a place of residence. Whether the construction of a property is substantially completed on a particular day is a question of fact, and builders/owners of properties will have to make that determination on a case-by-case basis.” This is consistent with substantial completion interpretations for GST/HST filings.

Furthermore, it is important to note that per CRA there is no obligation to file a return “for a property for a calendar year if the construction of the property is not substantially completed on December 31 of the calendar year.”

CHBA Ongoing Advocacy for Full Exclusion

The above should provide substantial relief for CHBA members.
CHBA continues to advocate for a full exclusion for builders, renovators and developers from having to file the UHT-2900. However, a full exclusion will likely require a change to the legislation itself, which will take a longer period of time. In support of CHBA’s advocacy on seeking a full exclusion, members are still encouraged to contact their MPs about how builders, developers and renovators should be excluded from having to file UHT-2900 returns.

February 5, 2023

The federal Underused Housing Tax (UHT) Act unfortunately can affect nearly all builder and developer members across the country. Hopefully you have already been contacted by your accountant about this issue, but in case you haven't, please note the following (and what CHBA is doing about it).

While the Act states that newly built housing units are not subject to the Underused Housing Tax, all private corporations – therefore all builders and developers that are not publicly owned – are now required to file an Underused Housing Tax return (UT-2900) each year. This requires residential property owners (with some exceptions), including those with no foreign ownership, to file an annual UHT return for each housing unit owned on or after December 31, even where no tax is payable. Significant penalties apply if the UHT return is not filed by the deadline of April 30. CHBA is actively advocating against this situation, since builders and developers will now be encumbered with unnecessary red tape and accounting expenses to file tax returns for a tax that does not even need to be paid, since newly built housing units are exempt.

For more details, CHBA Alliance Network partner MNP, one of Canada’s leading accounting, consulting, tax, and digital services firms, has a very thorough overview of the Underused Housing Tax Act. We encourage you to read it to find out if and how this applies to your company.

Details on this tax have been slow to emerge, and many questions remain and clarifications are still needed. Indeed, the actual UT-2900 form only came out last week. Given the unacceptable situation this is placing our industry in, CHBA is asking that the federal government immediately implement an exemption so that builders and developers will not have to file a tax return for their newly constructed housing units for which they still possess title. It is unknown at this time if such an adjustment will be possible in time for this year’s filing deadline. Therefore unfortunately, and until further notice, members should proceed as if the UHT rules will proceed as they currently are published.

Given that these filings are due April 30th (in reality, May 1st this year since April 30th is a Sunday) and the government is being very slow to react to the issue confronting our industry, you may wish to contact your local Member of Parliament to express your grave concern over this bureaucratic red tape that will cause work and expense for your company and for all of Canada’s corporations in home building and development - businesses that are working to add more housing supply, now burdened with red tape that will add unnecessary additional costs to housing. If your residence and your business are located in different ridings, we would also encourage you to contact the MPs for both. Please see here for contact information for your Member of Parliament.

CHBA will continue advocating to get this administrative burden removed from our industry, and to update membership on progress made in seeking an exemption.