Even if your cottage is fully exempt from the 1% tax under the vacation property rules, if you are a foreign owner, you **must still file Form UHT-2900 annually** to declare the exemption. Failing to file by April 30 results in a minimum **$5,000 CAD penalty** per property.
The Vacation Property Exemption Rules
To qualify for the vacation property exemption from the Underused Housing Tax, your residential property must meet two key tests:
- Geographic Eligibility (The Location Test): The property must be located in an eligible rural or vacation area of Canada. Eligible areas are defined as outside a Census Metropolitan Area (CMA) or Census Agglomeration (CA) with a population of 30,000 or more.
- 28-Day Usage (The Occupancy Test): The property must be used personally by the foreign owner, their spouse, or common-law partner for at least **28 days** during the calendar year.
- Limitation: You or your spouse can only claim **one** residential property under the vacation exemption for any given calendar year.
How to Verify Your Postal Code with CRA
CRA provides an online lookup tool to verify geographic eligibility:
- Get Postal Code: Locate the 6-character postal code of your cottage (e.g. in Muskoka, Laurentians, or Okanagan).
- Use CRA Tool: Enter the postal code into the **CRA Underused Housing Tax Vacation Property Designate Tool**.
- Save Confirmation: The tool will output whether the postal code is located in an eligible rural/seasonal area. Print the confirmation page and save it in your tax records as audit defense.
Declaring the Exemption on Form UHT-2900
To register your vacation property exclusion, follow these filing steps:
- Exemption Code: Select the corresponding code under Part 5 (e.g., Code 502 for vacation property in eligible areas).
- Specify Owners: Each foreign co-owner must submit a separate UHT-2900 form.
- Deadline: Submit the return by **April 30** of the year following the tax year.
This guide compiles official CRA guidelines and tax definitions for the UHT vacation exemption sourced directly from:
• Canada Revenue Agency (CRA) UHT Vacation Property Exemption: canada.ca/cra-uht-vacation-rules
• CRA UHT Postal Code Designation Lookup Tool: canada.ca/cra-uht-lookup-tool