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: 245734
Business Number: N/A
Dear [Client]:
Subject: Underused Housing Tax (UHT) interpretation
UHT filing requirement for the executor of an estate
Thank you for your correspondence of [mm/dd/yyyy], concerning UHT filing requirements for the executor of an estate for the 2022 calendar year. We apologize for the delay in this response.
All legislative references are to the Underused Housing Tax Act (UHTA) unless otherwise specified.
[…], we understand that:
Scenario 1 – A Canadian citizen, who was an excluded owner of a residential property, died on January 1, 2020. The deceased was the only person identified as the owner of the residential property in the land registration system immediately before their death. Subsequently, the residential property formed part of the deceased’s estate. Under the will of the deceased, an executor was appointed to administer the estate. The estate remained unsettled on December 31, 2022. The executor did not register an application in the land registration system to have the title of the residential property transferred to them and the deceased was identified as the owner of the residential property in the land registration system on December 31, 2022.
Scenario 2 – A Canadian citizen, who was an excluded owner of a residential property, died on January 1, 2022. The deceased was the only person identified as the owner of the residential property in the land registration system immediately before their death. Subsequently, the residential property formed part of the deceased’s estate. Under the will of the deceased, an executor was appointed to administer the estate. The estate remained unsettled on December 31, 2022. The executor did not register an application in the land registration system to have the title of the residential property transferred to them and the deceased was identified as the owner of the residential property in the land registration system on December 31, 2022.
Scenario 3 – A Canadian citizen, who was an excluded owner of a residential property, died on January 1, 2020. The deceased was the only person identified as the owner of the residential property in the land registration system immediately before their death. Subsequently, the residential property formed part of the deceased’s estate. Under the will of the deceased, an executor was appointed to administer the estate. After probate was granted, the executor registered an application in the land registration system to have the title of the residential property transferred to them and became the only person identified as an owner of the residential property in the land registration system on December 31, 2022.
Scenario 4 – A Canadian citizen, who was an excluded owner of a residential property, died on January 1, 2022. The deceased was the only person identified as the owner of the residential property in the land registration system immediately before their death. Subsequently, the residential property formed part of the deceased’s estate. Under the will of the deceased, an executor was appointed to administer the estate. After probate was granted, the executor registered an application in the land registration system to have the title of the residential property transferred to them and became the only person identified as an owner of the residential property in the land registration system on December 31, 2022.
INTERPRETATION REQUESTED
You would like to know what is the filing requirement for the 2022 calendar year in each of the scenarios above if the executor is:
1. an individual who is a citizen of Canada
2. an individual who is a citizen of the United States of America (USA)
3. a Canadian trust company (the Company) which is a private corporation wholly owned by a Canadian public company
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. 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 that:
* 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 “owner”
The term “owner” is defined in section 2 as follows:
owner of a residential property means a person that is identified as an owner in respect of the residential property under the land registration system or other similar system applicable where the residential property is located, or that could reasonably be considered to be an owner in respect of the residential property based on such a system, and includes a person that
(a) is a life tenant under a life estate in respect of the residential property,
(b) is a life lease holder in respect of the residential property,
(c) has, under a long-term lease, continuous possession of the land on which the residential property is situated, or
(d) is a prescribed person,
but does not include
(e) a person that gives continuous possession of the land on which the residential property is situated to persons referred to in paragraph (b) or (c), or
(f) a prescribed person.
The first person mentioned in the definition of “owner” is a person that is identified as an owner in respect of the residential property in the land registration system or other similar system applicable where the residential property is located. The CRA interprets this as referring to a person that is identified as a legal (titled) owner in respect of the residential property in the land registration system. Such a person could be an owner in respect of the residential property in any capacity, including in their own right, as a trustee of a trust, or as a partner of a partnership.
The definition of “owner” is crucial to the operation of the UHT in that it determines a person’s obligations with respect to the tax. To be clear, only a person that is an owner of a residential property is brought into the scope of subsections 6(3) and 7(1). However, if the person is an excluded owner, they have no obligations under those subsections.
Definition of “excluded owner”
The term “excluded owner” is defined in section 2. We will focus on paragraphs (b) and (c), which are applicable to the scenarios you described. For the 2022 calendar year, the definition read, in part:
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;
(c) a corporation incorporated under the laws of Canada or a province whose shares are listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect;
Pursuant to paragraph (b) of the definition of “excluded owner” for the 2022 calendar year, the following are examples of individuals that are excluded owners for UHT purposes:
* an individual who is a citizen or permanent resident of Canada and who is an owner of a residential property in the following roles:
*as an individual in their own right; or
*as a personal representative of a deceased individual.
Conversely, as a consequence of paragraph (b) of the definition of “excluded owner” for the 2022 calendar year, the following are examples of individuals that are affected owners for UHT purposes:
* an individual who is not a citizen or permanent resident of Canada and who is an owner of a residential property in any of the following capacities:
*as an individual in their own right;
*as a personal representative of a deceased individual;
Scenarios 1 and 2 that you presented are similar to Question 12.1 in Underused Housing Tax Notice UHTN15, Questions and Answers About the Underused Housing Tax. Here is the response to that question:
The term person is not defined in the UHTA. In addition, the UHTA does not contain any provision deeming certain associations, relationships or other arrangements to be a person for UHT purposes. To be clear, the UHTA is silent on whether a deceased individual (or the estate of a deceased individual) is a person for UHT purposes.
Generally, subsection 6(3) of the UHTA 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 the UHT in respect of the residential property for the calendar year. However, paragraph 6(7)(h) of the UHTA provides that no UHT is payable under subsection 6(3) by a person in respect of a residential property for a calendar year if the person died during the calendar year or the prior calendar year.
The CRA views the language in subsection 6(3) and paragraph 6(7)(h) of the UHTA as suggesting that, for UHT purposes, a deceased individual who was an affected owner of a residential property immediately before their death continues to be regarded as an affected owner of the residential property after their death, and for as long as they are identified as an owner of the residential property in a land registration system. If such a treatment is possible for an affected owner of a residential property, then the CRA accepts that a similar treatment is possible for an excluded owner of a residential property. Specifically, a deceased individual who was an excluded owner of a residential property immediately before their death continues to be regarded as an excluded owner of the residential property after their death, and for as long as they are identified as an owner of the residential property in a land registration system.
Further, since the executor did not register an application in the land registration system to have the title of the property transferred to them, the executor was not identified as an owner of the residential property in the land registration system on December 31, 2022. Consequently, in accordance with the definition of “owner,” the executor, whether an individual or corporate executor, was not an owner of the residential property for UHT purposes, and therefore, did not have an obligation in their own right to pay the UHT or file a UHT return for the residential property for the 2022 calendar year.
Definition of “personal representative”
The term “personal representative” is defined in section 2 as follows:
personal representative, in respect of a deceased individual, means the executor of the individual’s will, the liquidator of the individual’s succession, the administrator of the estate of the individual or any person that is responsible under the appropriate law for the proper collection, administration, disposition and distribution of the assets of the estate or succession of the individual.
Generally, the role of a personal representative, in respect of a deceased individual, is to gather the assets of the deceased, discharge the funeral and testamentary expenses and debts, and distribute the remaining assets among the persons entitled. The personal representative may be an executor (that is, appointed by the deceased individual in their will) or an administrator appointed by the court.
In Scenarios 3 and 4, the executor registered an application in the land registration system to have the title of the residential property transferred to them and became the only person identified as an owner of the residential property in the land registration system on December 31, 2022. Consequently, the executor was an owner of the residential property for the 2022 calendar year. As an owner of the residential property, the executor must determine their obligations under subsection 7(1) and 6(3) of the UHTA.
If the executor was a citizen of Canada
As illustrated in the list of examples of excluded owner, if the executor was a citizen of Canada, the executor would be an excluded owner for the 2022 calendar year, and therefore, would not have an obligation in their own right to pay the UHT or file a UHT return for the residential property for the 2022 calendar year.
If the executor was a citizen of the USA
As illustrated in the list of examples of affected owner, if the executor was a citizen of the USA, the executor would be an affected owner for the 2022 calendar year, and therefore, would have an obligation in their own right to file a UHT return for the residential property for the 2022 calendar year. They would also have to pay the UHT, unless they qualified for an exemption.
If the executor was a corporation which is wholly owned by a public company
Paragraph (c) of the definition of “excluded owner” provides a corporation is an excluded owner if both of the following conditions are met:
* incorporated under the laws of Canada or a province
* its shares are listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect
Since the shares of the Company were not listed on a stock exchange in Canada, the Company did not meet the second condition under paragraph (c) of the definition of “excluded owner”. So, unless the Company was described elsewhere in another paragraph of the definition of “excluded owner,” the Company would not be an “excluded owner” for the 2022 calendar year. Subsequently, the Company would have an obligation in its own right to file a UHT return for the residential property for the 2022 calendar year. The Company would also have to pay the UHT unless it qualified for an exemption.
Information about exemptions for personal representatives of deceased individuals
Paragraph 6(7)(i) provides an exemption for personal representatives of a deceased individual. In short, a person that is an affected owner of a residential property on December 31 of a calendar year does not have to pay the UHT for the property for the calendar year if:
* the person is the personal representative of a deceased individual who was an owner of the residential property in the calendar year or the previous calendar year; and
* the person is not an owner of the residential property in either of those calendar years, except as the personal representative of the deceased individual.
As such, the executors in Scenarios 3 and 4 could qualify for this exemption for the 2022 calendar year as long as both conditions were met.
ADDITIONAL INFORMATION
Amendments to the definition of “excluded owner”
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 revised the definition of “excluded owner” to include more persons as excluded owners starting from the 2023 and subsequent calendar years. For example, starting from the 2023 calendar year, a corporation is an excluded owner if the following conditions are met:
* incorporated or continued under the laws of Canada or a province, and
* at least 90% of its shares owned or controlled by another corporation that is incorporated or continued under the laws of Canada or a province whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes.
For more information about these amendments, please refer to Underused Housing Tax Notice UHTN16, Proposed Amendments to the Underused Housing Tax, which can be found on the Canada.ca website.
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 UHTA, regulations, or the CRA’s interpretative policy could affect the interpretations 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 directly 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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