Small businesses and startups often seek cost-effective commercial spaces within urban areas. The implementation of the Underused Housing Tax (UHT) has the potential to repurpose underutilized residential buildings into viable commercial spaces. This strategic conversion could result in an expansion of small businesses’ operations by maximizing the utilization of currently underused properties, consequently stimulating overall economic growth.
By offering incentives or tax breaks through the UHT framework, there is a possibility of nurturing new entrepreneurial ventures, thereby creating a conducive and supportive atmosphere for startups to thrive. Moreover, this approach has the added benefit of enhancing property values, consequently leading to an increase in tax revenue for the local authorities.
A Brief on Underused Housing Tax
The GST or HST Rulings Directorate of the CRA issued by the technical interpretation to the Canadian Home Builders Association explains the following:
- For UHT purposes, a particular property is referred to as the “residential property” as soon as its construction is completed, generally at 90% or even more, which makes it great for habitation.
- When its construction is not substantially completed by December 31 of a calendar year, the owner or builder will not be obligated to file the UHT return for the property for that particular year.
- The units for the condominium complex are considered residential property for UHT purposes, even when the complex isn’t registered officially. But the owner or builder needs to file the UHT return for the individual unit. For this reason, the unit should be completed by December 31st.
- It isn’t a prerequisite to report the value of the property or recent sale price while filing the UHT return. Rather than that, ” $0″ might be entered on lines 280 & 285, given conditions like no tax payable for that property because of the available exemption and UHT return filed by December 31.
Now, how does the UHT or Underused Housing Tax benefit small businesses in Canada? Before understanding the benefits, let’s take a look at who needs to file the UHT return.
Who Is Required to File for the Underused Housing Tax or UHT Return?
The notion behind the new tax was to assist in cooling the real estate market and curbing speculation by non-residents. The concept of the Underused Housing Tax draws inspiration from vacancy taxes that were initially introduced in British Columbia and Ontario for specific purposes. When the idea of the UHT was first introduced, the general perception was that it primarily targeted foreign or non-resident owners of Canadian real estate. However, it has become apparent that certain Canadian citizens also have an obligation to file the UHT return in order to prevent incurring penalties.
The Underused Housing Tax is applicable when residential properties (ones that are predominantly vacant) are owned by people who are non-permanent residents or aren’t Canadian citizens. The return should be filed to claim the exemption from the tax. If your business falls within these categories, you need to file the UHT return:
- Most private Canadian companies own several residential properties
- Non-permanent residents or non-Canadian citizens possessing a residential property
- People who are trustees of a charity or trust and own residential property (excluding testamentary trusts)
- Partners of a corporation owning a residential real estate
Can Underused Housing Tax Benefit Canadian Small Businesses?
Small businesses and startups often seek cost-effective commercial spaces within urban areas. The implementation of the Underused Housing Tax (UHT) has the potential to repurpose underutilized residential buildings into viable commercial spaces. This strategic conversion could result in an expansion of small businesses’ operations by maximizing the utilization of currently underused properties, consequently stimulating overall economic growth.
By offering incentives or tax breaks through the UHT framework, there is a possibility of nurturing new entrepreneurial ventures, thereby creating a conducive and supportive atmosphere for startups to thrive. Moreover, this approach has the added benefit of enhancing property values, consequently leading to an increase in tax revenue for the local authorities.
These are some benefits that small businesses in Canada can enjoy with the Underused Housing Tax.
How Can Accountants Offer the Right Assistance?
CPAs play a crucial role in recognizing the ownership situations which fall under UHT rules. In addition, they assist clients in comprehending potential filing as well as tax implications.
Did you know that some Canadian property owners are not even aware of the existence of the UHT return? So, they lack an insightful understanding of the provisions. So, it is advisable for property owners to take measures and educate themselves about their property and whether it is subjected to UHT rules.
To avoid penalties, one needs to stay well-informed about the UHT return. That’s where the role of an accountant comes into being. With an accountant by your side, you can get a foundation point to understand all the ins and outs of Underused Housing Tax for small businesses.
So, if you have ownership of a Canadian residential property (within a partnership, trust, or corporation), it is advisable to consult an accountant. The professional can guide you on whether you need to file the return. You will also stay informed about the potential exemptions (if any).
Get in touch with Scan Professional Accounting Services experts who can assist you with the right guidance. Our seasoned staff can perform day-to-day tasks associated with your accounting or bookkeeping besides offering corporate tax planning, payroll services, etc.
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