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: 246044
Dear [Client]:
Subject: Underused housing tax (UHT) ruling
Definition of “residential property”
Thank you for your correspondence of [mm/dd/yyyy], concerning your property and whether certain buildings situated on it meet the definition of “residential property” 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.
STATEMENT OF FACTS
Based on your correspondence, and your conversations with my colleague […] on [mm/dd/yyyy], we understand that:
1. Your correspondence relates to a parcel of real property located in […][Canada]. According to the copy of the abbreviated parcel register (issued by […][the land registration system]) that you provided for our review, the parcel of real property is legally described as […] (the Property).
2. Four buildings are situated on the Property:
a) One building is an uninsulated cabin (the Cabin) containing four rooms which include a kitchen/living area and three bedrooms. A gas-powered pump draws water from […][a nearby waterway] for use in the kitchen. The stove and refrigerator are powered by propane. A single solar panel with a small battery powers the lights; otherwise, there is no electricity. A fireplace in the Cabin is the source of heat.
b) The second building is an outbuilding (the Outbuilding) that contains one room with two beds.
c) The other two buildings are outhouses.
3. The Property is […] accessible from early May to late October.
4. According to the copy of abbreviated parcel register that you provided for our review, ownership of the Property is under a life estate. You are identified as an owner of the Property, on the abbreviated parcel register, in the capacity as remainder.
5. You are not a citizen or a permanent resident of Canada.
RULING REQUESTED
You would like to know whether either the Cabin or the Outbuilding meets the definition of “residential property” for UHT purposes, and therefore, whether you have to file a UHT return for either of the buildings.
RULING GIVEN
Based on the facts set out above, we rule that neither the Cabin nor the Outbuilding is a residential property for UHT purposes. Therefore, you do not have to file UHT returns for either of the buildings.
EXPLANATION
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 “residential property”
The term “residential property” is defined in section 2 as follows:
residential property means property (other than prescribed property) that is situated in Canada and that is
(a) a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;
(b) a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real or immovable property owned, or intended to be owned, apart from any other unit in the building together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or
(c) a prescribed property.
Based on the facts set out above, paragraph (a) of the definition of “residential property” is the only paragraph that could possibly apply to either the Cabin or the Outbuilding. Under paragraph (a), a detached house or similar building (that is, the Cabin or the Outbuilding) must contain not more than three dwelling units. The Canada Revenue Agency (CRA) interprets this to mean that a detached house or similar building must contain at least one dwelling unit, but less than four dwelling units, to be brought into the scope of paragraph (a) of the definition of “residential property.”
The term “dwelling unit” is defined in section 2 as follows:
dwelling unit means a residential unit that contains private kitchen facilities, a private bath and a private living area.
For purposes of the definition of “dwelling unit,” the CRA interprets the term “residential unit” to mean a single self-contained set of rooms in a building or part of a building that is distinguished from any other such set of rooms in the building or part and that is characteristic of, and suitable as, a residence. A residential unit that does not contain private kitchen facilities, a private bath or a private living area is not a dwelling unit for UHT purposes.
Given the Cabin does not contain a private bath, and the Outbuilding does not contain either private kitchen facilities or a private bath, neither building contains a dwelling unit. Consequently, neither building is brought into the scope of paragraph (a) of the definition of “residential property.” As a result, you do not have to file a UHT return for either the Cabin or the Outbuilding as neither building is a residential property for UHT purposes.
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.
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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