Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 246152
CRA Tax Identifier: N/A
Dear [Client]:
Subject: Underused housing tax (UHT) interpretation
UHT application to owners in multiple capacities
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the UHT to trustee of a trust. […].
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
[…], we understand that:
1. […] (the Company) is identified as the sole owner of a residential property (the Property) under the land registration system on December 31, 2022.
2. The Company is a corporation that is wholly owned by an other corporation that is publicly traded on a Canadian stock exchange.
3. You have provided a scenario under which:
a. The Company is an owner of the Property as the trustee of Trust A. The Company has a 50% ownership percentage of the Property in this capacity.
b. The Company is also an owner of the Property as the trustee of Trust B. The Company has a 50% ownership percentage of the Property in this capacity.
c. Both Trust A and Trust B meet the definition of specified Canadian Trust for the 2022 calendar year.
INTERPRETATION REQUESTED
You would like to know whether the Company has to file a return, for the 2022 calendar year, for each capacity that they are an owner of the residential property.
INTERPRETATION GIVEN
UHT obligations
Under subsection 7(1) of the UHTA, a person who is not an excluded owner of residential property on December 31 of a calendar year must file a UHT return for the calendar year. The term “excluded owner” is defined in section 2.
The Canada Revenue Agency (CRA) uses the term “affected owner” to refer to a person that is an owner of a residential property on December 31 of a calendar year and that is not an excluded owner of the residential property on that date.
Under subsection 6(3), a person that is an affected owner of a residential property on December 31 of a calendar year has to pay the UHT for the residential property for the calendar year, unless their ownership of the residential property is exempt from the tax for the calendar year. Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax, provides more information on who is an excluded owner.
You have determined that the Company is an affected owner for the 2022 calendar year.
Ownership in multiple capacities
On June 20, 2024, Bill C-69, the Budget Implementation Act, 2024, No. 1, received royal assent. Among other things, Bill C-69 added section 4.1 to the UHTA which reads as follows:
If a person is an owner of a residential property in the person’s capacity as a partner of a partnership or a trustee of a trust, this Act applies to the person as if the person were a separate person in respect of
(a) each partnership for which the person is an owner of the residential property in the person's capacity as a partner of the partnership;
(b) each trust for which the person is an owner of the residential property in the person's capacity as a trustee of the trust; and
(c) all other capacities in which the person is an owner of the residential property.
Section 4.1 is effective retroactively to January 1, 2022. Where a person is an owner of a residential property in more than one capacity, and one of those multiple capacities is as a partner of a partnership or as a trustee of a trust, the person is treated as if the person were a separate person in each capacity in which the person is an owner of the residential property.
In the scenario that you presented, for the 2022 calendar year, the Company would be treated as a separate person with respect to its 50% ownership of the Property in its capacity as a trustee of Trust A. In this capacity, the Company would be an affected owner and would have to file an annual UHT return for the Property for the 2022 calendar year. Similarly, for the 2022 calendar year, the Company would be treated as a separate person with respect to its 50% ownership of the Property in its capacity as a trustee of Trust B. In this capacity, the Company would also be an affected owner and would also have to file an annual UHT return for the Property for the 2022 calendar year.
As an affected owner of a residential property for the 2022 calendar year, the Company would also have to pay the UHT for the residential property for the calendar year, unless its ownership of the residential property is exempt from the tax for the calendar year.
Exemption for specified Canadian trust
Pursuant to subparagraph 6(7)(a)(ii), an affected owner of a residential property that owns a residential property in their capacity as a trustee of a trust that is a specified Canadian trust for the calendar year is exempt from the UHT for the 2022 calendar year.
Paragraph (a) of the definition of specified Canadian trust in section 2 defines a specified Canadian trust, in part, as “a trust under which each beneficiary having a beneficial interest in the residential property is, on December 31 of the calendar year, an excluded owner or a specified Canadian corporation.”
If Trust A or Trust B is a specified Canadian trust as defined, the Company would be eligible to claim this exemption for the 2022 calendar year.
ADDITIONAL INFORMATION
Amendments to the definition of “excluded owner”
Bill C-69 also amended the definition of “excluded owner” to include more persons as excluded owners starting with the 2023 calendar year. Specifically, a person would be an excluded owner for UHT purposes, for the 2023 and subsequent calendar years, if the person is an owner of a residential property as a trustee of a trust that is a specified Canadian trust. As an excluded owner of a residential property for a calendar year, such a person would not have to file a UHT return or pay the UHT for the residential property for the calendar year.
Given that trustees of specified Canadian trusts were added as excluded owners for UHT purposes starting with the 2023 calendar year, the exemption for trustees of specified Canadian trusts in subparagraph 6(7)(a)(ii) was repealed for the 2023 and subsequent calendar years. In short, the exemption for trustees of specified Canadian trusts is available only for the 2022 calendar year.
For more information about the amendments of the UHTA under the Bill C-69, please refer to Underused Housing Tax Notice UHTN16, Proposed Amendments to the Underused Housing Tax, which can be found on the Canada.ca website.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretations given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the UHTA, regulations, or the CRA’s interpretative policy could affect the interpretations or the additional information provided herein.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call Stacy Furlong at 902-719-7843.
Sincerely,
Jackson Chiu
Senior Rulings Officer
Real Property – Specialty Tax Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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