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: 247012
Dear [Client]:
Subject: Underused housing tax (UHT) interpretation
Definition of “residential property” for UHT purposes
Thank you for your correspondence of [mm/dd/yyyy], concerning the definition of residential property for UHT purposes in respect of real property located in resorts/hotels. We apologize for the delay in this response.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
Based on your correspondence and our conversation on [mm/dd/yyyy], we understand that:
1. […] and […] are individuals who are not citizens or permanent residents of Canada.
2. They own together two properties in a hotel/resort in […][province X].
3. The properties are self-contained dwelling units that each contain private kitchen facilities, a private bathroom and a private living area.
4. Each individual unit has its owns property identification number and is a separate parcel of real property that can be sold separately.
5. All the units in the hotel/resort are designated to accommodate short-term stays by arm’s length persons in stays of less than 30 days.
6. For property tax purposes, one property is zoned as residential and the second property is zoned as both residential and business.
7. The owners occupied each property for less than 28 days in 2022.
INTERPRETATION REQUESTED
You would like to know whether the two properties described would meet the definition of residential property based on the fact that they are in a hotel/resort and are not intended to be enjoyed as a permanent place of residence for individuals.
INTERPRETATION GIVEN
Definitions of “residential property” and “dwelling unit”
Section 2 of the UHTA defines “residential property” as 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.
Paragraph (a) of the definition of “residential property” includes a property that is a detached house or similar building, containing not more than three dwelling units. There is an underlying assumption that the detached house or similar building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, paragraph (a) applies where a person owns the building as a whole under one legal title but does not apply where the person owns any dwelling units in the building separately under distinct legal titles.
Paragraph (b) of the definition of “residential property” includes a property that is a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises. There is an underlying assumption that the parts of the building (the parts typically being dwelling units in their own right) are separate parcels or other divisions of real or immovable property. Put differently, paragraph (b) applies where a person owns any parts/dwelling units in the building separately under distinct legal titles but it does not apply where the person owns the building as a whole under one legal title.
Section 2 of the UHTA defines “dwelling unit” as a residential unit that contains private kitchen facilities, a private bath and a private living area.
For purposes of the definition of “dwelling unit” in section 2 of the UHTA, 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 of a building and that is characteristic of, and suitable as, a residence. Further, for UHT purposes, the CRA interprets the term “residential condominium unit” to mean a bounded space in a building that is (or is intended to be) both of the following:
- designated or described as a separate unit in the building on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and includes any interest in land pertaining to ownership of the unit and
- a dwelling unit
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.
The definition of “residential property” does not contain a use test with respect to a building or part of a building, or with respect to any unit that makes up the building or part. Put differently, residential ‘use’ of a property is not a pre-condition that must be met in order for a building or part of a building to be brought within the scope of paragraph (a) or (b) of the definition of “residential property.” Further, since no use test is contained in the definition of “residential property,” any restrictions imposed with respect to the use of a building or part of a building, or with respect to any unit that makes up the building or part, whether imposed by contract or law, are immaterial for purposes of determining whether the building or part is brought within the scope of the paragraph (a) or (b) of the definition of “residential property.” Rather, it is a property’s physical characteristics and suitability as a residence that are factors in bringing a building or part of a building within the scope of paragraph (a) or (b) of the definition of “residential property.”
Consequently, if the two accommodation units described in the facts each contain a dwelling unit (i.e., private kitchen facilities, a private bath and a private living area), they would be residential condominium units for UHT purposes, and thus, would be included in paragraph (b) of the definition of “residential property.” A property that is brought within the scope of the paragraph (a) or (b) of the definition of “residential property” is regarded as a residential property for UHT purposes, regardless of whether it is used or made available for short-term rentals by the owners.
In contrast, if an accommodation unit does not contain a dwelling unit, it would not meet the definition of “residential property”. Where a property does not meet the definition of “residential property”, the owner would not have any UHT filing obligations for that property.
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 Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the UHTA, 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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