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: 246059
Dear [Client]:
Subject: Underused housing tax (UHT) ruling and UHT interpretation
Obligation to file UHT returns
Thank you for your correspondence of [mm/dd/yyyy], concerning your properties and whether you have to file separate UHT returns for them. We apologize for the delay in this response.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
STATEMENT OF FACTS
Based on your correspondence, and your conversation with my colleague […] on [mm/dd/yyyy], we understand that:
1. […] (the Corporation) operates as a medical practice and was incorporated in […][province X] on [mm/dd/yyyy], under incorporation number [#].
2. The Corporation owns properties, situated in […][Canada]. You have advised us that the properties are residential properties for UHT purposes.
3. You are a citizen of Canada and the sole shareholder of the Corporation. The Corporation’s shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect.
RULING REQUESTED
You would like to know whether the Corporation has to file separate UHT returns for its residential properties, and the due date for the returns. Also, you would like to know whether the Corporation is eligible for the exemption for specified Canadian corporations.
As noted in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, there are circumstances where a ruling will not be issued. A ruling provides the Canada Revenue Agency’s (CRA) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented in writing. As we are not in possession of all of the pertinent facts relating to the ownership of the residential properties, we are unable to provide a ruling on whether the Corporation has to file separate UHT returns for its residential properties.
However, we are pleased to provide a ruling on whether the Corporation is eligible for the exemption for specified Canadian corporations. We are providing an interpretation of the relevant UHTA provisions which may help the you determine whether the Corporation has to file separate UHT returns for its residential properties and the due date for the returns. Also, we are providing additional information which might affect the Corporation’s UHT obligations for the 2023 and subsequent calendar years.
RULING GIVEN
Based on the facts set out above, we rule that the Corporation is a specified Canadian corporation for UHT purposes, and therefore, may be eligible for the exemption under paragraph 6(7)(b).
EXPLANATION
Definition of “specified Canadian corporation”
The term “specified Canadian corporation” is defined in section 2 as follows:
specified Canadian corporation, in respect of a calendar year, means a corporation that is incorporated or continued under the laws of Canada or a province other than a corporation that is, on December 31 of the calendar year
(a) a corporation in respect of which the following persons have ownership or control, directly or indirectly, of shares of the corporation representing 10% or more of the value of the equity in the corporation or carrying 10% or more of the voting rights under all or under some circumstances:
(i) an individual who is neither a citizen nor a permanent resident,
(ii) a corporation that is incorporated or continued otherwise than under the laws of Canada or a province, or
(iii) any combination of individuals or corporations referred to in subparagraphs (i) and (ii);
(b) a corporation without share capital having
(i) a chairperson or other presiding officer who is neither a citizen nor a permanent resident, or
(ii) 10% or more of its directors who are neither citizens nor permanent residents; or
(c) a prescribed corporation.
The Corporation is a corporation that is incorporated under the laws of a province. Given the Corporation has share capital, the Corporation does not fall within the carve-out in paragraph (b) of the definition of “specified Canadian corporation.” Further, given you are a citizen of Canada and you are the sole shareholder of the Corporation, the Corporation does not fall within the carve-out in paragraph (a) of the definition of “specified Canadian corporation.” Consequently, where neither of the carve-outs apply on December 31 of a calendar year, the Corporation is a specified Canadian corporation for the calendar year for UHT purposes.
Exemption for “specified Canadian corporations”
Paragraph 6(7)(b) provides that no tax is payable under subsection 6(3) by a person in respect of a residential property (other than a prescribed residential property) for a calendar year if the person is in respect of the calendar year a specified Canadian corporation.
Consequently, where the Corporation is a specified Canadian corporation for a calendar year for UHT purposes, the Corporation is eligible for the exemption for specified Canadian corporations for any residential property for which the Corporation is an affected owner of for the calendar year.
INTERPRETATION GIVEN
UHT obligations
Generally, the UHTA sets out two obligations:
1. subsection 7(1) provides that a person that is an owner (other than an excluded owner) of one or more residential properties on December 31 of a calendar year is required to file a return for each 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 (other than an excluded owner) of a 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, 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.
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 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; 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 “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 all 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 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.
As we are not in possession of all of the pertinent facts relating to the ownership of the residential properties (for example, we do not know if the Corporation is identified as a legal (titled) owner in the land registration system) we cannot make a determination as to whether the Corporation falls within the definition of “owner.”
Definition of “excluded owner”
The term “excluded owner” is defined in section 2. For simplicity, we will focus on paragraphs (c) and (d), which are the two paragraphs that most commonly apply to a person that is a corporation:
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
(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;
Pursuant to paragraphs (c) and (d) of the definition of “excluded owner,” the following are examples of corporations that are excluded owners for UHT purposes:
* 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:
* as a corporation in its own right;
* as a personal representative of a deceased individual;
* as a trustee of a trust that is not a mutual fund trust, real estate investment trust or SIFT trust for Canadian income tax purposes; or
* as a partner of a partnership; or
* any corporation that is an owner of a residential property as a trustee of a trust that is a mutual fund trust, real estate investment trust or SIFT trust for Canadian income tax purposes.
Corporations that are not mentioned in the above list are, by default, affected owners for UHT purposes, unless the corporation is described elsewhere in another paragraph of the definition of “excluded owner.”
As we are not in possession of all of the pertinent facts relating to the Corporation (for example, we do not know if the Corporation’s shares are listed on a Canadian stock exchange designated for Canadian income tax purposes) we cannot make a determination as to whether the Corporation falls within the definition of “excluded owner.”
Even if the Corporation is an owner of the residential properties for UHT purposes, and even if the Corporation is an affected owner of the residential properties for UHT purposes, the fact remains that the Corporation is eligible for the exemption for specified Canadian corporations.
ADDITIONAL INFORMATION
On May 2, 2024, the Minister of Finance Canada tabled Bill C-69, the Budget Implementation Act, 2024, No. 1, in the House of Commons. Among other things, Bill C-69 would affect specified Canadian corporations, like the Corporation. These amendments were previously announced on November 21, 2023, and would apply in the 2023 and subsequent calendar years.
Under the proposed amendments, the definition of “excluded owner” would be revised to include more persons as excluded owners. Specifically, a corporation would be an excluded owner for UHT purposes, for the 2023 and subsequent calendar years, if the corporation is an owner of a residential property (but neither as a trustee of a trust nor as a partner of a partnership) and the corporation is a specified Canadian corporation. As an excluded owner of a residential property for a calendar year, a corporation would not have to file a UHT return or pay the UHT for the residential property for the calendar year.
For more information about the proposed amendments, please refer to Underused Housing Tax Notice UHTN16, Proposed Amendments to the Underused Housing Tax, which can be found on the Canada.ca website.
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 CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the UHTA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. 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 Stacy Furlong at 902-719-7843.
Sincerely,
Chris Lewis
Manager
Real Property – Specialty Tax Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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