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: 246078
Business Number: N/A
Dear [Client]:
Subject: Underused housing tax (UHT) interpretation
UHT application to personal representatives of deceased individuals
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the underused housing tax (UHT) to personal representative of deceased individuals.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
Based on your correspondence, and your conversations with my colleague Jackson Chiu on [mm/dd/yyyy], we understand that:
Scenario 1: A Canadian citizen, deceased on January 1st, 2020, owns a residential property. The legal ownership of the property is still under the deceased citizen’s name.
Scenario 2: A Canadian citizen, deceased on January 1st, 2022, owns a residential property. The legal ownership of the property is still under the deceased citizen’s name.
Scenario 3: A Canadian citizen, deceased on January 1st, 2020, owned a residential property. The legal ownership of the property was transferred to the executor after probate was received.
Scenario 4: A Canadian citizen, deceased on January 1st, 2022, owned a residential property. The legal ownership of the property was transferred to the executor after probate was received.
INTERPRETATION REQUESTED
You would like to know for the four scenarios described if a UHT return is required to be filed:
1. where a Canadian trust company is the executor.
2. where a Canadian citizen is the executor.
3. where a citizen of the United States (US) is the executor.
You would also like to know if a Canadian trust company that is a wholly owned subsidiary of a company listed on a stock exchange in Canada would be an excluded owner for UHT purposes.
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 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:
* 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;
* a person that owns a residential property in more than one capacity must file a separate UHT return for each capacity in which they are an affected owner; 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 UHT for the calendar year.
Definition of “owner”
The term “owner” is defined in section 2 as follows:
owner of a residential property means a person that is identified as an owner in respect of the residential property under the land registration system or other similar system applicable where the residential property is located, or that could reasonably be considered to be an owner in respect of the residential property based on such a system, and includes a person that
(a) is a life tenant under a life estate in respect of the residential property,
(b) is a life lease holder in respect of the residential property,
(c) has, under a long-term lease, continuous possession of the land on which the residential property is situated, or
(d) is a prescribed person,
but does not include
(e) a person that gives continuous possession of the land on which the residential property is situated to persons referred to in paragraph (b) or (c), or
(f) a prescribed person.
The first person mentioned in the definition of “owner” is a person that is identified as an owner in respect of the residential property in the land registration system or other similar system applicable where the residential property is located. The CRA interprets this as referring to a person that is identified as a legal (titled) owner in respect of the residential property in the land registration system. Such a person could be an owner in respect of the residential property in any capacity, including in their own right, as a trustee of a trust, or as a partner of a partnership.
The definition of “owner” is crucial to the operation of the UHT in that it determines a person’s obligations with respect to the UHT. To be clear, only a person that is an owner of a residential property is brought into the scope of subsections 6(3) and 7(1). However, if the person is an excluded owner, they have no obligations under those subsections.
Definition of “excluded owner” for the 2022 calendar year
The UHTA was amended by Bill C-69 which received royal assent on June 20, 2024. For 2023 and subsequent calendar years, the amendments to the definition of “excluded owner” may change how the UHTA applies to the facts you have provided. However, given that your questions are related to the 2020 and 2022 calendar years and because the UHT took effect on January 1, 2022, we are focusing on the definition of excluded owner that applied to the 2022 calendar year.
The term “excluded owner” is defined in section 2. We will focus on paragraphs (b) and (c), which are the paragraphs that apply to the persons described in your facts:
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;
(c) a corporation incorporated under the laws of Canada or a province whose shares are listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect; […]
Pursuant to paragraphs (b) and (c) of the definition of “excluded owner,” the following are examples of persons that are excluded owners for UHT purposes:
* an individual who is a citizen or permanent resident of Canada and who is an owner of a residential property in any of the following capacities:
o as an individual in their own right;
o as a personal representative of a deceased individual; or
* a corporation that is incorporated under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes and that is an owner of a residential property in any of the following capacities:
o as a corporation in its own right;
o as a personal representative of a deceased individual;
If an owner is not an excluded owner, then they are an affected owner for UHT purposes.
Please refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax for a complete definition of “excluded owner” for the 2022 calendar year.
Definition of “personal representative”
The term “personal representative” is defined in section 2 as follows:
personal representative, in respect of a deceased individual, means the executor of the individual’s will, the liquidator of the individual’s succession, the administrator of the estate of the individual or any person that is responsible under the appropriate law for the proper collection, administration, disposition and distribution of the assets of the estate or succession of the individual.
Generally, the role of a personal representative, in respect of a deceased individual, is to gather the assets of the deceased, discharge the funeral and testamentary expenses and debts, and distribute the remaining assets among the persons entitled. The personal representative may be an executor (that is, appointed by the deceased individual in their will) or an administrator appointed by the court.
In Scenarios 1 and 2, the executor was not identified as an owner of the residential property in the land registration system on December 31, 2022. Consequently, in accordance with the definition of “owner,” the executor, regardless of whether it is an individual or a corporation, was not an owner of the residential property for UHT purposes, and therefore, did not have an obligation in their own right to file a UHT return or to pay the UHT for the residential property for the 2022 calendar year.
For Scenarios 3 and 4, since the executor was identified as an owner of the residential property in the land registration system on December 31, 2022, there are different explanations depending on who is the executor.
If the executor was a citizen of Canada
As illustrated in the list of examples of excluded owner, if the executor was the legally titled owner and was a citizen of Canada, the executor would be an excluded owner for the 2022 calendar year under paragraph (b) of that definition, and therefore, would not have an obligation in their own right to file the UHT return or pay the UHT return for the residential property for the 2022 calendar year.
If the executor was a citizen of the United States
If the executor was the legally titled owner and was not a citizen or a permanent resident of Canada, the executor would be an affected owner for the 2022 calendar year, and therefore, would have an obligation in their own right to file a UHT return for the residential property for the 2022 calendar year. They would also have to pay the UHT unless they qualified for an exemption. In one of your scenarios, the executor would be a citizen of the USA and as such would be an affected owner.
If the executor was a Canadian trust company
Paragraph (c) of the definition of “excluded owner” provides a corporation is an excluded owner if both of the following conditions are met:
* the corporation is incorporated under the laws of Canada or a province
* the corporation’s shares are listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect
If the Canadian trust company does not meet those two conditions, the Canadian trust company would not be an “excluded owner” for the 2022 calendar year regardless of whether it is a wholly owned subsidiary of a company listed on a stock exchange in Canada. Subsequently, the Canadian trust company would be an affected owner and would have an obligation to file a UHT return for the residential property for the 2022 calendar year. In addition, the Canadian trust company would have to pay the UHT unless it qualified for an exemption.
ADDITIONAL INFORMATION
Under the amendments to the UHTA, the definition of “excluded owner” was amended to include more persons as excluded owners starting with the 2023 and subsequent calendar years. For example, starting with the 2023 calendar year, a corporation is an excluded owner if the following conditions are met:
* the corporation is incorporated or continued under the laws of Canada or a province, and
* at least 90% of the corporation’s shares are owned or controlled by another corporation that is incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes.
For more information on the changes to the definition of excluded owner, refer to UHTN1, Introduction to the Underused Housing Tax.
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 613-296-9615.
Sincerely,
Zahra Sylla
Senior Rulings Officer
Real Property - Specialty Tax Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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