Exemption for Vacation Properties
Disclaimer
We do not guarantee the accuracy of this copy of the CRA website.
Scraped Page Content
Exemption for Vacation Properties
Underused Housing Tax Notice UHTN5
April 2025
This version replaces the one dated January 2023. This notice has been updated to reflect amendments to the Underused Housing Tax Act and its regulations, including two new conditions for claiming the exemption for vacation properties starting with the 2024 calendar year. These amendments received royal assent on June 20, 2024.
The purpose of this notice is to help you determine if your ownership of a residential property qualifies for the exemption for vacation properties. Please note that if you are an excluded owner, this publication does not apply to you. For more information on who is an excluded owner, refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax.
Except as otherwise noted, all statutory references in this publication are to the provisions of the Underused Housing Tax Act (UHTA) and its regulations. The information in this publication does not replace the law found in the UHTA and its regulations.
Table of Contents
Overview
The Government of Canada introduced an underused housing tax (UHT) on the ownership of vacant or underused housing in Canada. The Underused Housing Tax Act (UHTA), which governs the UHT, received royal assent on June 9, 2022. The UHT took effect on January 1, 2022.
The underused housing tax
If you are an affected owner of a residential property on December 31 of a calendar year, you have to pay the UHT for the residential property for the calendar year, unless your ownership of the residential property is exempt from the UHT for the calendar year. For general information on the UHT, including an explanation of affected owner, excluded owner, owner, and residential property, and to determine whether the UHT applies to you, refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax.
Where certain conditions are met, your ownership of a residential property may be exempt from the UHT if the property is any of the following:
- a vacation property that is located in an eligible area of Canada (refer to the "Exemption for vacation properties" section of this notice)
- used as a primary place of residence or for qualifying occupancy
- not suitable for year-round use
- seasonally inaccessible
- uninhabitable during the calendar year
- newly constructed
- starting with the 2023 calendar year, an employee accommodation that is located in an eligible area of Canada
Your ownership of a residential property may also be exempt if you are any of the following:
- a new owner
- a deceased individual, or their personal representative or co-owner
- for the 2022 calendar year only, a partner of a specified Canadian partnership, a trustee of a specified Canadian trust, or a specified Canadian corporation
This notice provides detailed information on the exemption for vacation properties. For more information about other exemptions, refer to the various Underused housing tax notices.
Even if your ownership of a residential property is exempt from the UHT for a calendar year, as an affected owner, you still have to file a return for the residential property using Form UHT-2900, Underused Housing Tax Return and Election Form.
There are penalties if you fail to file an annual UHT return when it is due. Affected owners who are individuals are subject to a minimum penalty of $1,000. Affected owners that are corporations are subject to a minimum penalty of $2,000. For more information, refer to Underused Housing Tax Notice UHTN3, Filing a Return and Paying the Underused Housing Tax.
Exemption for vacation properties
Only individuals who own residential properties in their own right (and not in their capacity as a partner of a partnership, or in their capacity as a trustee of a trust) are eligible for the exemption for vacation properties.
Conditions for the 2024 and subsequent calendar years
Starting with the 2024 calendar year, if you are an affected owner of a residential property on December 31 of a calendar year, your ownership of the residential property is exempt from the UHT for the calendar year if all of the following conditions are met:
- based on the last census published by Statistics Canada before the calendar year, the residential property is located in an eligible area of Canada – an eligible area is a place that is any of the following:
- outside both a census metropolitan area and a census agglomeration
- inside a census agglomeration that is not a specified census agglomeration
- inside a census metropolitan area or a specified census agglomeration but outside a population centre that is part of such an area or agglomeration
- you, or your spouse or common-law partner, personally use the residential property as a place of residence or lodging for at least 28 days in the calendar year
- you indicate in your annual UHT return for the residential property for the calendar year that no UHT is payable for the residential property on account of the exemption for vacation properties
- neither you nor your spouse or common-law partner indicate in any other annual UHT return for any other residential property for the calendar year that no UHT is payable for the other residential property (or residential properties) on account of the exemption for vacation properties
Conditions for the 2022 and 2023 calendar years
For the 2022 and 2023 calendar years, if you are an affected owner of a residential property on December 31 of a calendar year, your ownership of the residential property is exempt from the UHT for the calendar year if both of the following conditions are met:
- based on the 2021 census published by Statistics Canada, the residential property is located in an eligible area of Canada – an eligible area is a place that is any of the following:
- outside both a census metropolitan area and a census agglomeration
- inside a census agglomeration that is not a specified census agglomeration
- inside a census metropolitan area or a specified census agglomeration but outside a population centre that is part of such an area or agglomeration
- you, or your spouse or common-law partner, personally use the residential property as a place of residence or lodging for at least 28 days in the calendar year
What are census metropolitan areas, census agglomerations, and population centres
Census metropolitan areas, census agglomerations, and population centres are statistical areas defined by Statistics Canada.
Census metropolitan areas and census agglomerations are densely populated areas made up of adjacent municipalities that are economically and socially integrated.
A census metropolitan area has a total population of at least 100,000 residents, of which 50,000 or more live in the core population centre.
A census agglomeration has 10,000 or more residents living in the core population centre. For purposes of the exemption for vacation properties, a specified census agglomeration is a census agglomeration having a population of at least 30,000 residents.
A population centre is an area that has a population of at least 1,000 residents and a population density of 400 persons or more per square kilometre.
Is your residential property located in an eligible area of Canada
The Canada Revenue Agency (CRA) has developed an online tool that will help you determine if your residential property is located in an eligible area of Canada for the purposes of this exemption. It is important for you to perform this verification each year before claiming the exemption for vacation properties on your return. To use this tool, go to Underused housing tax vacation property designation tool.
It is recognized that, in rare situations, the UHT vacation property designation tool will be unable to tell you whether your residential property is located in an eligible area for purposes of the exemption for vacation properties. In these rare situations, you will have to conduct a manual place search to determine whether your residential property is located in an eligible area. For instructions on how to perform a manual place search, refer to Underused Housing Tax Notice UHTN14, Exemption for Vacation Properties: Manual Place-search Instructions.
Example 1 – use of a residential property by the owner
An individual is not a citizen or permanent resident of Canada. The individual is the only person identified in the land registration system as an owner of a property located in Nova Scotia (a detached house) that they purchased in 2019. The individual is not an owner of any other residential property in Canada.
The property is located outside both a census metropolitan area and a census agglomeration. Therefore, it is located in an eligible area of Canada. The property is suitable for year-round use as a place of residence and it is accessible in all seasons because public access is maintained year-round.
The individual uses the property as their personal vacation home, typically in July and September each year. No one else uses the property when the individual returns to their primary place of residence outside Canada.
2022 calendar year
In the 2022 calendar year, the individual uses the property for 21 days in July and 14 days in September.
The individual has to file a return for the property for the 2022 calendar year by April 30, 2023. They do not have to pay the UHT for their 100% ownership percentage of the property for the 2022 calendar year because it is located in an eligible area of Canada and the individual uses the property as a place of residence or lodging for at least 28 days in that calendar year.
2023 calendar year
In the 2023 calendar year, the individual uses the property for 21 days in July. For personal reasons, they are unable to use the property at all in September or at any other time in the remainder of the 2023 calendar year.
The individual has to file a return for the property for the 2023 calendar year by April 30, 2024. Although the property is located in an eligible area of Canada, the individual does not use the property as a place of residence or lodging for at least 28 days in that calendar year. Assuming their ownership of the property does not qualify for any other exemption, they also have to pay the UHT for their 100% ownership of the property for the 2023 calendar year.
2024 calendar year
In the 2024 calendar year, the individual uses the property for 31 days in July and 31 days in August.
The individual has to file a return for the property for the 2024 calendar year and claim the exemption for vacation properties for the property by April 30, 2025. They do not have to pay the UHT for their 100% ownership percentage of the property for the 2024 calendar year because they meet all of the following conditions:
- the property is located in an eligible area of Canada
- the individual uses the property as a place of residence or lodging for at least 28 days in that calendar year
- the individual indicated in their return that no UHT is payable for the property on account of the exemption for vacation properties
- the individual does not indicate in any other annual UHT return that no UHT is payable for any other residential property for the calendar year on account of the exemption for vacation properties
Example 2 – use of a residential property by spouses or common-law partners
Individual A and Individual B are common-law partners and are not citizens or permanent residents of Canada. Each individual is identified in the land registration system as having 50% ownership of a property in Canada (a residential condominium unit) that they jointly purchased in 2018. Neither individual is an owner of any other residential property in Canada.
The property is located in a small resort village that is inside a census agglomeration having a total population of less than 30,000 residents, and thus, inside a census agglomeration that is not a specified census agglomeration. Therefore, it is located in an eligible area of Canada. The property is suitable for year-round use as a place of residence and it is accessible in all seasons because public access is maintained year-round.
Both individuals use the property as their personal vacation home on weekends during the golf season, typically from the beginning of May to the end of September each year. They personally use the property and do not place it in a rental pool for short-term rentals when they are not there. No one else uses the property when they return to their primary place of residence outside Canada.
2022 calendar year
In the 2022 calendar year, both individuals use the property together at the same time for 40 days between the beginning of May and the end of September.
Individual A and Individual B each have to file a separate return for the property for the 2022 calendar year by April 30, 2023. Neither of them has to pay the UHT for their respective 50% ownership percentage of the property for the 2022 calendar year because it is located in an eligible area of Canada and they use the property as a place of residence or lodging for at least 28 days in that calendar year.
2023 calendar year
In the 2023 calendar year, neither individual uses the property from the beginning of May to the middle of June. Individual A uses the property in June and July for a total of 10 days. Individual B uses the property in August for 14 days and in September for 7 days.
Individual A and Individual B each have to file a separate return for the property for the 2023 calendar year by April 30, 2024. Neither of them has to pay the UHT for their respective 50% ownership percentage of the property for the 2023 calendar year because it is located in an eligible area of Canada and, as common-law partners, their combined use of the property as a place of residence or lodging is for at least 28 days in that calendar year.
2024 calendar year
In the 2024 calendar year, both individuals use the property together at the same time for 16 days in June. For personal reasons, they are unable to use the property at all at any other time in the remainder of the 2024 calendar year.
Individual A and Individual B each have to file a separate return for the property for the 2024 calendar year by April 30, 2025. Although the property is located in an eligible area of Canada, the individuals, together, do not use the property as a place of residence or lodging for at least 28 days in that calendar year. Assuming their ownership of the property does not qualify for any other exemption, each of the individuals also has to pay the UHT for their 50% ownership of the property for the 2024 calendar year.
Example 3 – use of multiple residential properties by the owner and their spouse or common-law partner
Individual C and Individual D are spouses who are not citizens or permanent residents of Canada. Each individual is identified in the land registration system as having 50% ownership of a property that is located in a ski resort area in British Columbia (a townhouse unit) that they purchased in 2017.
Both individuals purchased another lakeside property in northern Ontario (a detached house) in 2021. Each individual is identified in the land registration system as having 50% ownership of the property.
Neither Individual C nor Individual D is an owner of any other residential properties in Canada.
Both properties are located outside both a census metropolitan area and a census agglomeration. Therefore, both properties are located in an eligible area of Canada. Both properties are suitable for year-round use as a place of residence and are accessible in all seasons because public access is maintained year-round.
Individual C and Individual D use both properties as their personal vacation homes. They typically use the British Columbia property in January and the northern Ontario property in July of each year. No one else uses the properties when the individuals return to their primary place of residence outside Canada.
2024 calendar year
In the 2024 calendar year, both individuals use the British Columbia property for 31 days in January and the northern Ontario property for 31 days in July.
British Columbia property
Individual C and Individual D each have to file a separate return for the British Columbia property for the 2024 calendar year by April 30, 2025. Both individuals decide to claim the exemption for vacation properties for the British Columbia property in their respective return.
Neither individual has to pay the UHT for their respective 50% ownership percentage of the British Columbia property for the 2024 calendar year because they meet all of the following conditions:
- the property is located in an eligible area of Canada
- as owners and spouses, they personally use the property as a place of residence or lodging for at least 28 days in that calendar year
- each individual indicates in their respective return that no UHT is payable for the property on account of the exemption for vacation properties
- neither individual indicates in any other annual UHT return that no UHT is payable for any other residential property for the calendar year on account of the exemption for vacation properties
Northern Ontario property
Individual C and Individual D each have to file a separate return for the northern Ontario property for the 2024 calendar year by April 30, 2025.
By claiming the exemption for vacation properties for the British Columbia property, neither Individual C's nor Individual D's respective ownership of the northern Ontario property qualifies for the exemption for vacation properties for the 2024 calendar year even though they used the property for at least 28 days in that calendar year and the property is located in an eligible area.
Assuming neither Individual C's nor Individual D's ownership of the northern Ontario property qualifies for any other exemption, they each have to pay the UHT for their respective 50% ownership percentage of the northern Ontario property for the 2024 calendar year.
Keeping records
Every affected owner of a residential property must keep records to enable the determination of their obligations and liabilities under the UHTA. Generally, you must keep records for six years from the end of the year to which they relate.
If you do not have adequate records to support that your ownership of a residential property is exempt from the UHT for a calendar year, the CRA may disallow your exemption.
Further information
For all technical publications related to the UHTA, go to Underused housing tax technical information.
For general enquiries about the underused housing tax, call the applicable telephone number:
- if you are calling about a residential property that is owned by an individual and you are calling from:
- within Canada or the United States, call 1‑800‑959‑8281
- outside Canada and the United States, call 613‑940‑8495 (collect calls accepted)
- if you are calling about a residential property that is owned by a corporation and you are calling from:
- within Canada or the United States, call 1‑800‑959‑5525
- outside Canada and the United States, call 613‑940‑8497 (collect calls accepted)
To request a ruling or an interpretation related to the application of the underused housing tax, write to:
GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville Tower A 5th floor
320 Queen St
Ottawa ON K1A 0L5
Canada
Fax: 1‑418‑566‑0319
Refer to GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service , which explains the rulings and interpretations service offered by the Canada Revenue Agency.
Page details
- Date modified:
- 2023-01-17