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: 246060
Dear [Client]:
Subject: Underused housing tax (UHT) ruling
Definition of “excluded owner”
Thank you for your correspondence of [mm/dd/yyyy], concerning your property and whether you and your wife meet the definition of “excluded owner” 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 conversation with me on [mm/dd/yyyy], we understand that:
1. You and your wife own a condominium unit having the municipal address […][in Canada] (the Property).
2. You and your wife own the Property as joint tenants.
3. The Property is rented to individuals. A property management firm handles the day-to-day affairs of the Property.
4. You take care of all communications with the condominium management company and the property management firm.
5. The property manager firm believes that you and your wife are required to file UHT returns for the Property.
6. You and your wife are both citizens of Canada, although you both reside […][outside of Canada].
7. You and your wife do not own the Property as partners of a partnership or as trustees of a trust.
RULING REQUESTED
You would like to know whether you and your wife meet the definition of “excluded owner” for UHT purposes, and therefore, whether you have to file UHT returns for the Property.
RULING GIVEN
Based on the facts set out above, we rule that you and your wife are excluded owners for UHT purposes. Therefore, neither you nor your wife has to file UHT returns for the Property.
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. 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. 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 “excluded owner”
The term “excluded owner” is defined in section 2. For simplicity, 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 and your wife are citizens of Canada, and that neither of you is an owner of the Property in the capacity as trustee of a trust or as partner of a partnership, you and your wife are excluded owners of the Property for UHT purposes. The fact that you and your wife reside […][outside of Canada] does not alter your status as excluded owners for UHT purposes.
As excluded owners of the Property for a calendar year, neither you nor your wife has to file a UHT return or pay the UHT for the residential property for the calendar year.
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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