Bare Trusts & Underused Housing Tax (UHT)

Jared Pilon

On June 9, 2022, the Government of Canada initiated the Underused Housing Tax UHT). The tax will impact certain residential property owners effective December 31, 2022.

Simply put, the UHT is a 1% annual tax on underused residential housing in Canada. This is typically based on the taxable value of the property, although an election can be filed to use the fair market value of the property instead.


What is a bare trust?

This term is not defined with the Income Tax Act, but it is included in the definition of a trust within the Underused Housing Tax Act (UHTA) according to the Canada Revenue Agency’s ‘Questions and Answers About the Underused Housing Tax’ paragraph 1.13. CRA UHT Questions & Answers.

In layman’s terms, a bare trust exists when the legal owner of a property is different than the beneficial owner. Some examples include (but are not limited to):

  • A parent adds a child to title for probate planning.
  • A child adds a parent to title for financing purposes.
  • Legal title is held by a bare trust corporation, but a different entity is the beneficial owner.
  • Legal title is registered to one spouse, although both spouses enjoy beneficial ownership of the property.
  • Legal title is held on behalf of a group of owners in a partnership.


Are bare trusts required to file a UHT return?

Unfortunately, there is no distinction between bare trusts and other types of trusts within the UHTA. As such, trustees of bare trusts have a UHT filing requirement. Unless the residential property is held for a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT) for Canadian tax purposes, the respective trustees are not excluded owners and are therefore required to file an UHT return.


How will the new trust reporting rules impact me?

Beginning in the 2023 tax year, certain trusts will now be subject to new reporting and disclosure requirements. Bare trusts with a year end after December 31, 2023 will now be required to complete and file a T3 Trust Income Tax and Information Return.


Who files the UHT return if the bare trust has multiple trustees?

If a property is registered to multiple trustees, then each trustee will be responsible for filing an UHT return and reporting their prorated ownership per land titles. UHT filing requirements are based on the named listed on the title as noted in the applicable land title system.


Penalties for not filing an Underused Housing Tax return.

The penalties associated with non-compliance with respect of UHT returns are significant and vary based on the entity. Affected owners (those required to file a return under the Act) are subject to the following minimum penalties:

  • $5,000 for individuals.
  • $10,000 for corporations.

It is important to note that an affected owner of an excluded property may be subject to UHT if the applicable UHT return is not filed.

The filing deadline for the previous calendar year (2022) was April 30, 2023. CRA extended the deadline for which late penalties and interest would apply to October 31, 2023.



The application of the Underused Housing Act is extremely complex. If you or a corporation you are a shareholder of, are on title with respect to residential property and believe that a bare trust arrangement might apply to the ownership structure, it is important to contact Legacy Tax & Accounting LLP immediately.

Please reach out to us via reception(at) to discuss your specific UHT situation.



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Posted: 10/4/23