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: 246575
Dear [Client]:
Subject: UNDERUSED HOUSING TAX (UHT) INTERPRETATION
Interpretation and application of the definition of “specified Canadian trust”
Thank you for your correspondence of [mm/dd/yyyy], concerning the interpretation and application of the definition of “specified Canadian trust” in section 2 of the Underused Housing Tax Act (UHTA).
All legislative references are to the UHTA unless otherwise specified.
[…].
The term “trust” is not defined in the UHTA. However, […] in the response to Question 1.10 in Underused Housing Tax Notice UHTN15, Questions and Answers About the Underused Housing Tax (UHTN15), the Canada Revenue Agency (CRA) stated that a trust is not a person for UHT purposes.
The term “beneficiary” is not defined in the UHTA. However, […] in the response to Question 4.2 in UHTN15, the CRA stated that generally a beneficiary is a person for whose benefit the trust is created.
[…] in the response to Question 1.3 in UNTN15, the CRA stated that a partnership is not a person for UHT purposes. In the response to Question 1.2.1 in UHTN15, the CRA stated that it interprets the term partnership to mean a relationship that exists between persons carrying on a business in common with a view to profit.
INTERPRETATION REQUESTED
In the situation where a named beneficiary of a particular trust arrangement is a partnership, you would like to know whether the particular trust arrangement is required to look to the members of the partnership to first determine whether the members are excluded owners or specified Canadian corporations, in order to then determine if the particular trust arrangement qualifies as a specified Canadian trust.
INTERPRETATION GIVEN
Definition of “specified Canadian trust”
The term “specified Canadian trust” is defined in section 2 as follows:
specified Canadian trust, in respect of a calendar year and a residential property, means
(a) a trust under which each beneficiary having a beneficial interest in the residential property is, on December 31 of the calendar year, an excluded owner or a specified Canadian corporation; or
(b) a prescribed trust.
The terms “excluded owner” and “ specified Canadian corporation” are also defined in section 2. We understand that you are familiar with the definitions of these terms, so we will not reproduce or discuss them in this letter.
Definition of “person”
The term “person” is not defined in the UHTA. In addition, the UHTA does not contain any provision deeming certain associations, relationships or other arrangements to be a person for UHT purposes. Generally, a person is an individual; a human being. The Interpretation Act provides that, in every federal enactment, the term person, or any word or expression descriptive of a person, includes a corporation. For UHT purposes, the CRA interprets the term “person” to mean an individual or a corporation. This position is explained in the response to Question 1.1 in UHTN15, and is the rationale for the responses to Questions 1.10 and 1.3 in UHTN15 that a trust and a partnership are not persons for UHT purposes.
The response to Question 4.2 in UHTN15 states that while the term beneficiary is not defined in the UHTA, a beneficiary is generally a person for whose benefit the trust is created. While it is generally the case that a beneficiary is a person, we recognize that at times a written document for a particular trust may identify another trust or a partnership as a beneficiary of the particular trust arrangement, despite that a trust or partnership is not a person for UHT purposes.
The response to Question 4.3 in UHTN15 states, in part, that if a written document for a particular trust arrangement identifies another trust arrangement as a beneficiary, it is likely that the beneficiaries of the other trust arrangement are intended to be beneficiaries of the particular trust arrangement. Although not included in the response to Question 4.3 or elsewhere in UHTN15, it is also our view that if a written document for a particular trust arrangement identifies a partnership as a beneficiary, it is likely that the members of the partnership are intended to be beneficiaries of the particular trust arrangement.
In light of the above, in the situation where a named beneficiary of a particular trust arrangement is a partnership (that is, a relationship that is not a person for UHT purposes), the particular trust arrangement is required to look to the members of the partnership to first determine whether the members are excluded owners or specified Canadian corporations, in order to then determine if the particular trust arrangement qualifies as a specified Canadian trust.
On October 31, 2023, the Minister of National Revenue announced that owners of residential property who are affected by the UHT have until April 30, 2024, to file their returns and pay the UHT for the 2022 calendar year without being charged penalties or interest.
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.
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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