The UHT will impose a 1% annual tax on the value of residential real estate owned by certain individuals, corporations, partnerships and trusts. Owners (those on legal title) who are not excluded owners must file an annual declaration by April 30 in respect of the previous year.

first filing and tax deadline is April 30, 2023

Excluded owners include, for example, Canadian citizens or permanent residents for immigration purposes and corporations incorporated in Canada or a province and listed on a stock exchange. Those owners who meet an exemption from the tax will not be subject to the tax but must still file the annual declaration. If an owner is not an excluded owner and does not meet an exemption, they must file an annual declaration and pay the annual 1% tax. See VTN 488(16), 487(12) and 481, Appendix C, for more commentary on the UHT.

A November 2022 Canadian Tax Focus article (Traps In The Underused Housing Tax: Tiered Ownership Structures, Alex Kerslake) discussed challenges in meeting an exemption from the UHT where there is a tiered ownership structure that includes trusts or partnerships.

stacked partnerships would not meet the exemption for a specified Canadian partnership

An exemption from the UHT is available where a person is an owner of the residential property solely in their capacity as a partner of a partnership that is a specified Canadian partnership (UHT Act Subparagraph 6(7)(a)(i)). A specified Canadian partnership requires that all partners are either a specified Canadian corporation or an excluded owner. A partner which is itself a partnership would not meet this requirement, and therefore this exemption would not apply. Barring access to another exemption, the partnership must pay the UHT and file the associated declaration.

A similar issue appears to arise with trusts that own residential property where one of the beneficiaries is a partnership or trust (UHT Act Paragraph 6(7)(b)).

Where a trust is the sole shareholder of a corporation that owns residential property, and the trustee is neither a citizen nor a permanent resident, the corporation cannot meet the definition of a specified Canada corporation. As a result, barring access to another exemption, the UHT and filing obligations would apply.