In late winter 2023, the federal government announced that it is effectively extending the filing deadline of its new Underused Housing Tax (UHT) by an extra six months to give affected property owners time to comply with the new legislation. That date is October 31, 2023.

While this temporary reprieve is a step in the right direction, industry associations including Fruit and Vegetable Growers of Canada (FVGC), the Canadian Federation of Agriculture (CFA) and others continue to push for an exemption from the legislation for agriculture.

Here’s why.

Announced in the 2021 budget, the UHT became law last year and now applies for the first time for the 2022 tax year. It was designed to address Canada’s shortage of rental housing by imposing an annual one per cent tax on Canadian housing that the government deems to be vacant or underused.

Private corporations and partnerships as well as individuals who aren’t Canadian citizens or permanent residents must file a UHT return even if they don’t have to pay the tax. What is causing concern and frustration for agriculture is that private corporations and partnerships include farm businesses.

A separate return must be filed every year for each property a farm corporation owns, and the penalties for not filing are substantial: up to $5,000 for an individual and $10,000 for a corporation. And we’re hearing reports from growers that they’re being quoted costs from accounting firms that are as high as $1,000 per return to prepare the required government paperwork.

For fruit and vegetable growers, there is also the additional question of seasonal and temporary worker housing if those facilities are owned by a corporation or partnership. Currently, the Canada Revenue Agency (CRA) offers no clear guidance on this and while tax professionals are awaiting additional information from the federal government, they are advising farm corporations and partnerships to file the UHT out of precaution in the interim.

Farm corporations generally acquire more than one residence because they’re buying additional farmland to expand their businesses and that land happens to have a house on it. This new filing requirement places an onerous burden on farmers who mostly own their additional residences in rural areas and don’t contribute significantly to Canada’s rental housing market – or who have additional housing in place specifically for their international farm workers, as is the case in horticulture.

It must be noted that this new UHT requirement is not sector specific and applies to all Canadian corporations and partnerships. Agriculture just happens to be one sector particularly impacted by the unintended consequences from the legislation.

Resolutions directing farm organizations to lobby the Canada Revenue Agency for a filing exemption for agriculture were passed in recent weeks at both the FVGC and CFA annual general meetings, and advocacy efforts have been ramping up to address the issue.

Until there is resolution, growers are encouraged to consult with their tax professionals on how to proceed with respect to their potential UHT requirements for the 2022 tax year.

More information is also available on the Ontario Federation of Agriculture (OFA) website at www.ofa.on.ca, including a webinar OFA hosted this past winter in partnership with accounting firm BDO on the issue.