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: 246148
Dear [Client]:
Subject: Underused housing tax (UHT) interpretation
Definition of “personal representative”
Thank you for your correspondence of [mm/dd/yyyy], concerning the definition of “personal representative” for UHT purposes. We apologize for the delay in this response.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
INTERPRETATION REQUESTED
Based on your correspondence, and your conversation with my colleague […] on [mm/dd/yyyy], we understand that you would like to know whether an estate of a deceased individual can be characterized as a trust for UHT purposes. Specifically, where a corporation is an executor of a deceased individual’s will, could the corporate executor be eligible for the exemption for trustees of specified Canadian trusts in subparagraph 6(7)(a)(ii) – assuming the beneficiaries are all Canadian – even if the estate is an outright distributable one and there are no trusts in the will?
Where a corporate executor administers the estate of a deceased individual beyond two years, the corporate executor would not be eligible for the exemption for personal representatives of deceased individuals in paragraph 6(7)(i). Thus, where this happens, you would like to know if the corporate executor could be characterized as a trustee for UHT purposes, and therefore, eligible for the exemption for trustees of specified Canadian trusts in subparagraph 6(7)(a)(ii).
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.
Affected owners
The Canada Revenue Agency (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 “personal representative”
The term “personal representative” is defined in section 2 as follows:
personal representative, in respect of a deceased individual, means the executor of the individual’s will, the liquidator of the individual’s succession, the administrator of the estate of the individual or any person that is responsible under the appropriate law for the proper collection, administration, disposition and distribution of the assets of the estate or succession of the individual.
The term “personal representative” is used in various provisions in the UHTA. For example, it is used in paragraph (b) of the definition of “excluded owner” in section 2, and is also used in the exemption for personal representatives of deceased individuals in paragraph 6(7)(i).
Trustees versus personal representatives
The UHTA neither defines the term “trust” nor deems an arrangement to be a trust. Further, just because an arrangement may be a trust for purposes of another statute, that does not necessarily mean the arrangement is a trust for purposes of the UHTA.
In the broadest of terms, a trust could be thought of as an arrangement that involves a person (that is, the trustee) that holds title and/or control of a property for someone else (that is, the beneficiary or beneficiaries). Generally, a trust may be created by a person (either verbally or in writing), a court order, or a statute.
For UHT purposes, the CRA does not interpret paragraph (b) of the definition of “excluded owner” as contemplating that an individual who is a personal representative in respect of a deceased individual is a type of trustee of a trust.
The CRA interprets paragraph (b) as stating that an individual who is a citizen or permanent resident of Canada is an excluded owner for UHT purposes, except to the extent that the individual is an owner of the residential property in their capacity as a trustee of a trust. Consequently, if the individual happens to be performing distinct roles as personal representative in respect of a deceased individual and as trustee of a trust created under the deceased individual’s will, the individual remains an excluded owner in respect of the former role, but is an affected owner in respect of the latter role.
In the situation you presented, a corporation is the person performing the role of personal representative in respect of a deceased individual. Consequently, paragraph (b) of the definition of “excluded owner” would be irrelevant to that person. Therefore, unless the person/corporation is described elsewhere in another paragraph of the definition of “excluded owner,” the person/corporation would not be an excluded owner for UHT purposes.
Exemption for personal representatives versus exemption for trustees
As mentioned earlier, paragraph 6(7)(i) provides an exemption for personal representatives of a deceased individual. In short, a person that is an affected owner of a residential property on December 31 of a calendar year does not have to pay the UHT for the property for the calendar year if:
* the person is the personal representative of a deceased individual who was an owner of the residential property in the calendar year or the previous calendar year; and
* the person is not an owner of the residential property in either of those calendar years, except as the personal representative of the deceased individual.
Conversely, subparagraph 6(7)(a)(ii) provides an exemption for trustees of specified Canadian trusts. In short, a person that is an affected owner of a residential property on December 31 of a calendar year does not have to pay the UHT for the property for the calendar year if the person is an owner of the residential property solely in their capacity as a trustee of a trust that is a specified Canadian trust in respect of the calendar year.
The exemptions under paragraph 6(7)(i) and subparagraph 6(7)(a)(ii) are not interchangeable. The exemptions apply to persons performing distinct roles. To be clear, where a person that is a personal representative of a deceased individual (such as a corporate executor) is ineligible for the exemption under paragraph 6(7)(i) because they administer the assets of the estate of a deceased individual beyond two years, the person is not then eligible for the exemption under subparagraph 6(7)(a)(ii) in respect of their role as a personal representative in respect of a deceased individual. The exemption under subparagraph 6(7)(a)(ii) is available only to a person that is a trustee of a specified Canadian trust.
Proposed amendments to the definition of “excluded owner”
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 certain Canadian corporations. 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. For example, a person (such as a corporation) would be an excluded owner for UHT purposes, for the 2023 and subsequent calendar years, if the person is an owner of a residential property as a trustee of a trust that is a specified Canadian trust. As an excluded owner of a residential property for a calendar year, such a person would not have to file a UHT return or pay the UHT for the residential property for the calendar year.
Given trustees of specified Canadian trusts would be excluded owners for UHT purposes, it is proposed that the exemption for trustees of specified Canadian trusts in subparagraph 6(7)(a)(ii) would be repealed for the 2023 and subsequent calendar year. In short, the exemption for trustees of specified Canadian trusts would be available only for the 2022 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 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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