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: 247006
Business Number: N/A
Dear [Client]:
Subject: Underused Housing Tax (UHT) interpretation
Application of the UHT to corporations
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the UHT to corporations.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
INTERPRETATION REQUESTED
You would like to know:
1. if a [foreign corporation] is considered an excluded owner for UHT purposes?
2. if a [foreign corporation] would be eligible to claim the exemption for vacation properties?
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.
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 under the land registration system or other similar system applicable where the residential property is located. The Canada Revenue Agency (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.
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
Although not defined in the UHTA, the 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”
The definition of “excluded owner” in the UHTA was amended for 2023 and subsequent calendar years. For more information, please see the “Additional Information” section further in this letter. This section discusses the definition of “excluded owner” for the 2022 calendar year.
The definition of “excluded owner” in section 2 states:
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
(a) Her Majesty in right of Canada or a province or an agent of Her Majesty in right of Canada or a province;
(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;
(d) a person that is an owner of the residential property in their capacity as a trustee of
(i) a mutual fund trust as defined in subsection 248(1) of the Income Tax Act,
(ii) a real estate investment trust as defined in subsection 122.1(1) of that Act, or
(iii) a SIFT trust as defined in subsection 122.1(1) of that Act;
(e) a registered charity as defined in subsection 248(1) of the Income Tax Act;
(f) a cooperative housing corporation, a hospital authority, a municipality, a public college, a school authority, or a university as those terms are defined in subsection 123(1) of the Excise Tax Act or a para-municipal organization as defined in section 1 of Part VI of Schedule V to that Act;
(g) an Indigenous governing body as defined in section 2 of the Department of Indigenous Services Act or a corporation wholly owned by such a body; or
(h) a prescribed person.
If the [foreign corporation] is not an excluded owner, then it is an affected owner and must file a UHT return using form UHT-2900, Underused Housing Tax Return and Election Form.
For more information on the above definitions, please refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax, which can be found on the Canada.ca website.
Exemption for vacation properties
Paragraph 6(7)(m) provides that no tax is payable under the UHTA provided that the residential property is located in a prescribed area and the prescribed conditions are met. The prescribed areas and conditions are provided in section 2 of the Underused Housing Tax Regulations (Regulations). However, only individuals who are owners of the residential properties in their own right (and not in their capacity as a partner of a partnership, nor in their capacity as a trustee of a trust) are eligible for this exemption.
For more information about the exemption for vacation properties, please refer to Underused Housing Tax Notice UHTN5, Exemption for Vacation Properties, which can be found on the Canada.ca website.
ADDITIONAL INFORMATION
Definition of “excluded owner”
The UHTA was amended by Bill C-69 which received royal assent on June 20, 2024. Among other things, Bill C-69 amends the definition of “excluded owner” to include more persons as excluded owners. This amendment applies to the 2023 and subsequent calendar years.
The following are examples of new excluded owners for UHT purposes for the 2023 and subsequent calendar years:
* an owner of the residential property in the following capacities:
o as a trustee of a specified Canadian trust
o as a partner of a specified Canadian partnership
o in its own right as a specified Canadian corporation (that is, neither as a trustee of a trust nor as a partner of a partnership)
For more information about the amendments to the definition of “excluded owner,” please refer to Underused Housing Tax Notice UHTN1.
Exemption for employee accommodations
Effective with the 2023 calendar year, section 2 of the Regulations was amended to include a new prescribed condition for purposes of the exemptions available under paragraph 6(7)(m) of the UHTA. This new exemption for employee accommodations is available if the residential property is located in a prescribed area and if the prescribed condition is also met.
Section 2 of the Regulations outlines the prescribed area and prescribed condition as follows:
2(2) For the purposes of paragraph 6(7)(m) of the Act, each of the following areas is a prescribed area in respect of a calendar year:
(a) an area that is, as determined in the last census published by Statistics Canada before the calendar year, neither within a census metropolitan area nor within a specified census agglomeration; and
(b) an area that is, as determined in the last census published by Statistics Canada before the calendar year
(i) within a census metropolitan area or specified census agglomeration, and
(ii) not within a population centre.
2(3) For the purposes of paragraph 6(7)(m) of the Act, each of the following paragraphs sets out conditions that are prescribed conditions for a calendar year and for the person and the particular residential property referred to in subsection 6(7) of the Act: […]
(b) the person, or another person that is related to the person, carries on business in Canada (in this paragraph referred to as the “operator”) and the particular residential property is held during the calendar year primarily to provide a place of residence or lodging to an individual at a location at which the individual is required to be in the performance of the individual’s duties as
(i) an officer — being a person holding an office — or an employee of the operator,
(ii) a contractor, or an employee of the contractor, engaged by the operator to render services at that location to the operator, or
(iii) a subcontractor, or an employee of the subcontractor, engaged by a contractor referred to in subparagraph (ii) to render services at that location that are acquired by the contractor for the purpose of supplying services to the operator.
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 ETA, 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
PROTECTED B
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