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: 245214
Business Number: N/A
Dear [Client]:
Subject: Underused housing tax (UHT) interpretation
Application of the UHT to small resort and tourism communities
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the UHT to small resort and tourism communities. We apologize for the delay in this response.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
You expressed your concern that the Bill C-32, An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022 and certain provisions of the budget tabled in Parliament on April 7, 2022, did not receive royal assent until December 15, 2022, leaving affected owners with no time to make travel plans to meet the prescribed condition which required the owner or their spouse or common-law partner to use the residential property as a place of residence or lodging for at least 28 days in 2022.
INTERPRETATION REQUESTED
You would like to know whether the Canada Revenue Agency (CRA) will provide any transitional relief to the owners of residential properties that are located in prescribed areas, who would otherwise qualify for the exemption for vacation properties for the 2022 calendar year if the properties were used as a place of residence or lodging for at least 28 days.
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.
Exemption for vacation properties
Paragraph 6(7)(m) provides that no tax is payable under subsection 6(3) by a person in respect of a residential property (other than a prescribed residential property) for a calendar year if the residential property is located in a prescribed area and prescribed conditions, if any, are met.
Prescribed areas
The prescribed areas are set out in subsection 2(2) of the Underused Housing Tax Regulations for the 2022 calendar year as follows:
For the purposes of paragraph 6(7)(m) of the Act, each of the following areas is a prescribed area in respect of a calendar year:
(a) an area that is, as determined in the census for 2021 as published by Statistics Canada before the calendar year, neither within a census metropolitan area nor within a specified census agglomeration; and
(b) an area that is, as determined in the census for 2021 as published by Statistics Canada before the calendar year,
(i) within a census metropolitan area or specified census agglomeration, and
(ii) not within a population centre.
Prescribed conditions
The prescribed conditions are set out in subsection 2(3) of the Underused Housing Tax Regulations for the 2022 calendar year as follows:
For the purposes of paragraph 6(7)(m) of the Act, a prescribed condition, for a calendar year and in respect of a person that is an owner of a residential property located in an area referred to in subsection (2), is that the residential property is used as a place of residence or lodging by the owner or the owner’s spouse or common-law partner for at least 28 days during the calendar year.
In the situation where an individual is an affected owner of a residential property in a small resort and tourism communities on December 31, 2022, the individual must file a UHT return for the residential property for the 2022 calendar year. The individual must also pay the UHT unless they qualified for an exemption.
As noted in the sections above, in order for the individual to be exempt from the UHT on account of the exemption for vacation properties, both of the following conditions must be met:
1. the residential property is located in a prescribed area
2. 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
Please note, the CRA is responsible for administering the UHTA and its Regulations as enacted by Parliament. The Department of Finance Canada is responsible for developing federal tax policy and amending the legislation. The UHTA does not provide the Minister of National Revenue with the power to relieve a person from their obligation to file an annual return, or to pay the UHT. Your request for the owners to be relieved from their filing and UHT obligations would require a legislative amendment which falls within the responsibility of the Department of Finance Canada.
ADDITIONAL INFORMATION
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, the exemption for vacation properties was amended by adding two new conditions to ensure that an individual, or an individual and their spouse or common-law partner, can only claim the exemption for one residential property for a calendar year. Starting in the 2024 calendar year, if you are an affected owner of a residential property on December 31 of a calendar year, your ownership of the residential property would be exempt from the UHT for the calendar year if all of the following conditions are met (please note the two new conditions for the 2024 calendar year at the bottom of the list):
* based on the last census published by Statistics Canada before the calendar year, the residential property is located in an eligible area of Canada – an eligible area is a place that is any of the following:
* outside both a census metropolitan area and a census agglomeration
* inside a census agglomeration that is not a specified census agglomeration
* inside a census metropolitan area or a specified census agglomeration but outside a
population centre that is part of such an area or agglomeration
* you, or your 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
* (new condition) you indicate in your annual UHT return for the residential property for the calendar year that no UHT is payable for the residential property on account of the exemption for vacation properties
* (new condition) neither you nor your spouse or common-law partner indicate in any other annual UHT return for any other residential property for the calendar year that no UHT is payable for the other residential property (or residential properties) on account of the exemption for vacation properties
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,
Jackson Chiu
Senior Rulings Officer
Real Property - Specialty Tax Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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