Canada’s federal government has announced changes to its tax framework, including the repeal of the Underused Housing Tax (UHT) and adjustments to the Luxury Tax.
The 2025 budget tabled on 4 November 2025 proposes to eliminate the federal UHT, such that there would be no UHT returns or payments required in 2025 or thereafter. However, the UHT requirements for calendar years 2022-2024 would continue to apply, including the application of penalties and interest for failing to file a return or for late payment. The cancellation of this federal tax would have no impact on various provincial or municipal UHTs that are currently in force.
The budget proposes to eliminate the luxury tax on aircraft and vessels, such that no tax would be payable in respect of the sale, importation or improvements to subject aircraft and vessels after 4 November 2025. Vendors that are currently registered with respect to aircraft and vessels would be required to file a final return covering the reporting period that includes 4 November 2025. Registrations would be maintained to allow vendors to claim applicable rebates (e.g., for exported items) before being automatically cancelled on 1 February 2028. Luxury tax will continue to apply to subject vehicles with a value over CAD 100,000.
Brian Morcombe
BDO in Canada
The 2025 budget tabled on 4 November 2025 proposes to eliminate the federal UHT, such that there would be no UHT returns or payments required in 2025 or thereafter. However, the UHT requirements for calendar years 2022-2024 would continue to apply, including the application of penalties and interest for failing to file a return or for late payment. The cancellation of this federal tax would have no impact on various provincial or municipal UHTs that are currently in force.
The budget proposes to eliminate the luxury tax on aircraft and vessels, such that no tax would be payable in respect of the sale, importation or improvements to subject aircraft and vessels after 4 November 2025. Vendors that are currently registered with respect to aircraft and vessels would be required to file a final return covering the reporting period that includes 4 November 2025. Registrations would be maintained to allow vendors to claim applicable rebates (e.g., for exported items) before being automatically cancelled on 1 February 2028. Luxury tax will continue to apply to subject vehicles with a value over CAD 100,000.
Brian Morcombe
BDO in Canada