The Underused Housing Tax Repeal: What It Means If You Own Property Through A Corporation

The Underused Housing Tax was sold to the public as a tax on foreign speculators sitting on empty Canadian homes. In practice, it also reached a surprising number of ordinary Canadian corporations, partnerships, and trustees, entities that owed no tax whatsoever but still faced steep penalties for failing to file a return proving it[1]. As of this spring, the going-forward version of that problem has been eliminated.

What The UHT Actually Was

Effective January 1, 2022, the UHT imposed an annual 1% federal tax on the ownership of vacant or underused residential property in Canada[2]. While primarily aimed at non-resident, non-Canadian owners, the rules defined "affected owners" broadly enough to catch certain Canadian entities too: private corporations other than registered charities, trustees of certain trusts, and partners in certain partnerships holding residential property[3]. Canadian citizens and permanent residents holding property directly in their own name were generally "excluded owners" with no filing obligation at all, the complexity fell almost entirely on anyone holding real estate through a corporate or trust structure.

Who Got Caught, Beyond Non-Residents

The affected-owner definition swept in scenarios many Canadian business owners never expected[3]: a Canadian-controlled corporation holding a residential property for an employee, a bare trust arrangement holding legal title to a house, or a partnership of Canadian residents holding a residential rental property. Even where a full exemption from actually paying the tax applied, for example a property occupied as a primary residence, the return still had to be filed to claim it. Missing that filing carried a minimum penalty of $5,000 for individuals and $10,000 for corporations, regardless of whether any tax was actually owed[4].

The Repeal

On March 26, 2026, the Budget 2025 Implementation Act, No. 1 received Royal Assent, confirming that affected owners do not need to file a return or pay the UHT for the 2025 calendar year and subsequent calendar years[5]. For a corporation or trustee holding residential property going forward, this specific compliance burden, and its outsized penalty risk relative to the actual tax at stake, has been removed entirely.

The Catch: 2022, 2023 and 2024 Still Apply

The repeal is not retroactive. CRA guidance is explicit that the requirement to file a UHT return and pay the tax, where applicable, continues to apply for the 2022, 2023, and 2024 calendar years under the law as it existed before this change[5]. Any affected owner that has not yet filed for those three years remains exposed to the same $5,000 or $10,000 minimum penalty per property per year that applied before the repeal. Given that transitional relief periods for the 2022 year already came and went once before, back-filing is squarely a catch-up exercise now, not a wait-and-see one.

What To Actually Do Now

Two separate questions are worth resolving in order. First, does the corporation, trust, or partnership hold any residential property, and did it do so at any point during 2022, 2023, or 2024? If so, a UHT filing review for those specific years is worth completing even though the rule is now gone going forward, since the penalty exposure for those years has not changed at all. Second, confirm there is nothing further to track for 2025 onward, since no return or payment is currently required for that year or later.