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: 246037
March 17, 2025
Dear [Client]:
Subject: Underused housing tax (UHT) interpretation
UHT application to your residential property
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the UHT application to your residential property. 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 telephone conversation with my colleague Jackson Chiu on [mm/dd/yyyy], we understand that:
1. Several years ago, you and your spouse purchased a residential property with the municipal address […] (the Property).
2. You usually use the Property for around three months a year.
3. You are the owner of the Property in your own capacity.
4. You are not a citizen or permanent resident of Canada.
5. You were unable to travel to Canada due to COVID-19 travel restrictions in 2022. As a result, you were unable to use the Property during the 2022 calendar year.
6. You only learnt about the UHT in February 2023.
7. You applied for an Individual Tax Number (ITN) immediately after you learnt about the UHT.
INTERPRETATION REQUESTED
You asked the Canada Revenue Agency (CRA) to relieve you from the requirements imposed on you under the UHTA, and to relieve you from the failure to file penalties if you do not receive the ITN before the filing deadline.
Relief from filing obligations
Please note the CRA is responsible for administering the UHTA and its Regulations as passed by the Parliament of Canada. The UHTA, as currently written, does not provide the Minister of National Revenue with the power to relieve a person from their obligation to file an annual return nor to pay the UHT unless they qualify for an exemption under subsection 6(7).
On June 20, 2024, Bill C-69, the Budget Implementation Act, 2024, No. 1, received Royal Assent. Among other things, Bill C-69 amended the UHTA. Specifically, it reduced the minimum failure to file penalty amounts to one fifth of their original amounts, retroactive to the inception of the UHTA on January 1, 2022 (that is, the reduction would apply to the 2022 and subsequent calendar years). The minimum failure to file penalty amount of $5,000 for affected owners who are individuals was reduced to $1,000.
Taxpayer relief
The taxpayer relief provisions give CRA officials the discretion to waive or cancel all or part of the interest and penalties charged to their account. Officials generally use this discretion when CRA actions, extraordinary circumstances, inability to pay or financial hardship, or other circumstances prevented the person from meeting their tax obligations. Each request will be reviewed on a case-by-case basis and evaluated on its own merits.
For more information on the taxpayer relief provisions and related forms and publications, go to canada.ca/penalty-interest-relief.
INTERPRETATION GIVEN
We are providing some information about UHTA provisions to help you understand your obligations under the UHT.
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.
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 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. As previously stated, an affected owner of a residential property on December 31 of a calendar year has to file a return by April 30 for the residential property for the calendar year. An affected owner of a residential property on December 31 of a calendar year also 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. 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.
Definition of “excluded owner”
The term “excluded owner” is defined in section 2. We will focus on paragraphs (b) and (d), which are the two paragraphs that most commonly apply to a person that is an individual:
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 […]
(b) an individual who is a citizen or permanent resident, except to the extent that the individual is an owner of the residential property in their capacity as a trustee of a trust (other than a personal representative in respect of a deceased individual) or as a partner of a partnership; […]
(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;
Given that you are neither a citizen nor permanent resident of Canada, and that you are not an owner of the Property in your capacity as a trustee of any of the trusts mentioned above, you would be an affected owner for UHT purposes.
As an affected owner of the Property for a calendar year, you must:
- file a return for the residential property for the calendar; and
- pay the UHT for the residential property for the calendar year unless your ownership of the residential property is exempt from the tax for the calendar year.
Subsection 6(7) provides a number of exemptions that may be available to you so that your ownership of the Property may be exempt from the UHT for the calendar year. The following are two exemptions that may be available to you:
Exemption for vacation properties
Your ownership of a residential property may be exempt from the UHT if both of the following conditions are met:
- the residential property is located in an eligible area of Canada; and
- the owner, or the owner’s spouse or common-law partner, personally use the residential property as a place of residence or lodging for at least 28 days in the calendar year.
We understand that you would not qualify for this exemption for the 2022 calendar year as you, or your spouse or common-law partner, did not use the Property as a place of residence or lodging for at least 28 days in that calendar year. However, you may be eligible to claim this exemption in subsequent years if both of the above conditions are met. The CRA has developed the Underused housing tax vacation property designation tool to help you determine if your residential property is located in an eligible area of Canada for the purposes of this exemption. It is important for you to perform this verification each year before claiming the exemption for vacation properties on your return. This tool is available on Canada.ca.
Note that, starting with the 2024 calendar year, two new conditions have been added to ensure that an individual (or an individual and their spouse or common-law partner) can only claim this exemption for one residential property for a calendar year. For more information about this exemption, refer to Underused Housing Tax Notices UHTN5, Exemption for Vacation Properties, and UHTN16, Proposed Amendments to the Underused Housing Tax.
Exemption for properties that cannot be used year-round
Your ownership of a residential property may be exempt from the UHT if any of the following conditions are met:
- the residential property has no permanent source of heat
- the residential property has no insulation
- the residential property lacks shelter from the elements (for example, the residential property has no doors or windows that provide protection from wind and snow)
- the residential property has no year-round source of power (the CRA does not consider this condition to be met if the owner has simply chosen to cut the power service during the winter)
- the residential property has no year-round source of water (the CRA does not consider this condition to be met if the owner has simply chosen to turn off the water during the winter)
- the residential property has no sewer or septic system that can function year-round
- water pipes or other plumbing lines are located in an area of the residential property where they would normally freeze during the winter (such as on the exterior of the residential property or in an uninsulated and unheated crawl space)
For more information about this exemption, refer to Underused Housing Tax Notice UHTN9, Exemptions for Residential Properties That Cannot Be Used Year-round, and the “Questions about residential properties unsuitable as a place of residence” section in the Underused Housing Tax Notice UHTN15, Questions and Answers About the Underused Housing Tax.
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 interpretations 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 ETA, regulations, or the CRA’s interpretative policy could affect the interpretations 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 613-296-9615.
Sincerely,
Zahra Sylla
Senior Rulings Officer
Real Property - Specialty Tax Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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