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: 247514
CRA Tax Identifier: N/A
Dear [Client]:
Subject: Underused housing tax (UHT) interpretation
Meaning of “private bath” for purposes of the definition of “dwelling unit”
We are writing in response to the correspondence we received on [mm/dd/yyyy], concerning the meaning of “private bath” for purposes of the definition of “dwelling unit”. We apologize for the delay in this response.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
We understand the following:
1. You and your spouse are owners of a [property] in Canada. The [property] is a single parcel of real property in the applicable land registration system.
2. There are two cabins situated on the [property].
3. Cabin A is a detached building and contains a private kitchen and a private living area.
4. […][An enclosure with a toilet is attached to Cabin A.] There are no other components or facilities inside the enclosure.
5. […][Descriptions of Cabin A]
6. Cabin B is a detached building and does not have a private bath. […][Descriptions of the property]
7. […][Descriptions of facilities on the property]
8. Neither cabins are equipped with any water pipes nor have running water.
INTERPRETATION REQUESTED
You would like to know how the Canada Revenue Agency (CRA) interprets the term “private bath” for purposes of the definition of “dwelling unit”.
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 “residential property”
The term “residential property” is defined in section 2 as follows:
residential property means property (other than prescribed property) that is situated in Canada and that is
(a) a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;
(b) a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real or immovable property owned, or intended to be owned, apart from any other unit in the building together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or
(c) a prescribed property.
Based on the facts set out above, paragraph (a) of the definition of “residential property” is the only paragraph that could possibly apply to the cabins. Under paragraph (a), a detached house or similar building must contain not more than three dwelling units. The Canada Revenue Agency (CRA) interprets this to mean that a detached house or similar building must contain at least one dwelling unit, but less than four dwelling units, to be brought into the scope of paragraph (a) of the definition of “residential property.”
The term “dwelling unit” is defined in section 2 as follows:
dwelling unit means a residential unit that contains private kitchen facilities, a private bath and a private living area.
For purposes of the definition of “dwelling unit,” the CRA interprets the term “residential unit” to mean a single self-contained set of rooms in a building or part of a building that is distinguished from any other such set of rooms in the building or part and that is characteristic of, and suitable as, a residence. A residential unit that does not contain private kitchen facilities, a private bath or a private living area is not a dwelling unit for UHT purposes.
The term “private bath” is not defined in the UHTA. For UHT purposes, the CRA interprets the term “bath” to mean a room or area that typically contains a sink, a toilet and a tub or shower. The CRA considers a bath to be a private bath where the bath in a residential unit is for the exclusive use of the occupants of the residential unit.
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 interpretation(s) 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 interpretation(s) 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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