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: 246076
Business Number: N/A
Dear [Clients]:
Subject: Underused Housing Tax (UHT) interpretation
UHT filing requirements for individuals
Thank you for your correspondence of [mm/dd/yyyy], concerning the UHT filing requirements for individuals. […]
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. You are a citizen of Canada. You have also indicated that your spouse is a permanent resident of Canada.
2. Both of you have been residing in […][foreign country] since [mm/dd/yyyy] and are currently non-residents for Canadian income tax purposes.
3. You and your spouse own [#] rental properties in Canada.
4. You have stated that you and your spouse do not own any of the properties as trustees of a trust or as partners of a partnership.
5. You are of the understanding that you and your spouse are excluded owners of the residential properties for UHT purposes. However, your accountant has advised you and your spouse that you should file UHT returns for the residential properties.
RULING REQUESTED
You would like a ruling confirming that you and your spouse are excluded owners and that neither of you has to file UHT returns for the four rental properties.
As noted in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, there are circumstances where a ruling will not be issued. For example, the Canada Revenue Agency (CRA) will not issue a ruling when it considers that it would be inappropriate to do so. Circumstances in which the CRA may not issue a ruling include when a request is for a determination of fact, and the circumstances are such that all of the pertinent facts cannot be established. For example, you have not established whether your spouse was a permanent resident on December 31 of the 2022 and each of the subsequent calendar years.
However, we are pleased to provide an interpretation of the relevant UHTA provisions which may help you determine whether you and your spouse have to file UHT returns.
INTERPRETATION GIVEN
UHT obligations
Generally, the UHTA sets out two obligations:
1. subsection 7(1) provides that a person that is, on December 31 of a calendar year, an owner of a residential property (other than an excluded owner of the residential property) is required to file a return for the residential property for the calendar year; and
2. subsection 6(3) provides that every person that is, on December 31 of a calendar year, an owner of a residential property (other than an excluded owner of the residential property) must pay to His Majesty in right of Canada tax in respect of the residential property for the calendar year in the amount determined by the formula described therein.
For each of the two obligations in respect of a particular property, it is important to determine whether a property is a residential property, whether a person is an owner, and whether the person is an excluded owner or an affected owner.
Excluded owners
A person that is an excluded owner of a residential property on December 31 of a calendar year does not have to file a UHT return or pay the UHT for the residential property for the calendar year. The definition of “excluded owner” is discussed in the following pages.
Affected owners
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 7(1), a person that is an affected owner of a residential property on December 31 of a calendar year has to file a return for the residential property for the calendar year. Please note that:
* a person that is an affected owner of two or more residential properties on December 31 of a calendar year has to file separate UHT returns for each residential property for the calendar year; and
* if there are two or more affected owners of a residential property on December 31 of a calendar year, each of the affected owners has to file a separate UHT return for the residential property for the calendar year.
Under paragraph 8(a), a person that is required under subsection 7(1) to file a return for a residential property for a calendar year must file it with the Minister of National Revenue on or before April 30 of the following calendar year.
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.
Definition of “excluded owner”
Section 2 provides the definition of “excluded owner”. This definition was amended for the 2023 and subsequent calendar years. As such, we are separately explaining the definition of “excluded owner” for the 2022 calendar year and for the 2023 and subsequent calendar years as each period may affect owners of residential property differently.
2022 calendar year
We will focus on paragraph (b), which is the paragraph that most commonly apply to a person that is an individual:
excluded owner of a residential property for a calendar year means a person (other than a prescribed person) that is on December 31 of the calendar year […]
(b) an individual who is a citizen or permanent resident, except to the extent that the individual is an owner of the residential property in their capacity as a trustee of a trust (other than a personal representative in respect of a deceased individual) or as a partner of a partnership; […]
If you are not an excluded owner of the residential property on December 31 of a calendar year, you are an affected owner of the residential property for the calendar year. See the previous section “Affected owners” for more information.
2023 and subsequent calendar years
Effective for the 2023 and subsequent calendar years, the definition of “excluded owner” has been amended to include more persons as excluded owners.
Under the amended definition of “excluded owner,” the following are examples of individuals who would be excluded owners for UHT purposes, for the 2023 and subsequent calendar years:
* an individual who is a citizen or permanent resident of Canada and who is an owner of a residential property in their own right;
* an individual who is not a citizen or permanent resident of Canada and who is an owner of a residential property in any of the following capacities:
o as a trustee of a trust that is a mutual fund trust, real estate investment trust or SIFT trust for Canadian income tax purposes; or
o as a trustee of a trust that is a specified Canadian trust.
If you are not an excluded owner of the residential property on December 31 of a calendar year, you are an affected owner of the residential property for the calendar year. See the previous section “Affected owners” for more information.
For more information about the amendments to the definition of “excluded owner,” please refer to Underused Housing Tax Notice UHTN1, Introduction 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 me directly at 437-996-1944.
Sincerely,
Annie Tao, MAcc, LLM, CPA
Senior Rulings Officer
Real Property - Specialty Tax Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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