CRA provides guidance on the UHTA amendments

CRA has published a further Underused Housing Tax Notice providing some basic illustrations of the application of the proposed UHTA amendments released on November 21, 2023.

It notes that where, for example, a Canadian parent and Canadian adult child both hold title to a Canadian residential property, it now will not matter whether they are co-owners or whether one is holding in trust for the other because, either way, they will be excluded owners (i.e., not required to file a return). Similarly, it will no longer matter regarding exempt owner status whether two Canadian individuals are holding title as co-owners or partners.

Due to the addition of a Canadian corporation whose shares are listed on a designated Canadian stock exchange to the excluded owner definition, a Canadian subsidiary of such a listed corporation will now be an excluded owner even if there is substantial foreign ownership of the listed corporation.

Section 4.1 will require an owner to account separately for each capacity in which it holds title (as trustee, partner or for its own account). For example, a foreign national holding title to a Canadian residential property as to 10% as trustee for a specified Canadian trust and as to the other 90% in her individual capacity will, in her capacity of trustee, be an excluded owner, but will be required to file a UHT return as to the 90% interest.

CRA notes that the amended definitions of specified Canadian partnership and specified Canadian trust essentially provide a look-through rule to an upper-tier partnership or trust, so that, for example, a lower-tier partnership will be tainted if any of the members of the upper-tier partnership is not one of the listed Canadian entities. (in fact, these definitions are broader than this, and deal with multi-tier arrangements.)

None of the UHT Notices discuss bare trusts or Quebec nominees.

Neal Armstrong. Summaries of Underused Housing Tax Notice UHTN16 Proposed Amendments to the Underused Housing Tax, 8 March 2024 under UHTA, s. 2, excluded owner – (a)(i), (b). (c)(iii), specified Canadian partnership – (a), specified Canadian trust – (a), s. 4.1, and Underused Housing Tax Regulations – s. 2(3).