Underused Housing Tax Notice UHTN15, Questions and Answers About the Underused Housing Tax, 17 April 2023

Two returns required where 2 registered individuals holding as partners (para. 1.8)

• Where 2 individual citizens are shown on the land registration system as co-owners, but hold in their capacity of members of a partnership, each must file a return.

Bare trusts (paras. 1.12, 1.13)

• “Trust” in para. (b) is interpreted to include a bare trust, being “a trust where the trustee holds legal (titled) ownership of the trust property and is not required to perform any active duty to carry out the trust;” and “trustee” is interpreted to include a bare trustee.

Meaning of “could reasonably be considered to be an owner” (para. 1.14)

• The reference to “could reasonably be considered to be an owner” does not include the beneficiaries of a trust.
• This phrase could apply based on the wording of a deed in a province using a deed-registration, rather than land titles, system.

Continuance into Canada not incorporation in Canada (para. 1.19)

• A corporation incorporated outside Canada and continued into Canada does not qualify as incorporated in Canada.

Need for private facilities (paras. 1.24, 1.35, 1.36)

• Boarding or lodging houses are not considered to be dwelling units due to the lack of “separate and self-contained sets of private living quarters.”
• Similarly, for dormitory quarters for foreign farm workers - but not if they are all put into a detached home that had been designed to service as a detached residence.

Focus on purpose of construction (para. 1.25)

• Commercial cottages, cabins and chalets situated on one lot are not considered to be residential properties - they “were purposely constructed or converted to be something other than a residence.”
• Cottages built on separate lots qualify under para. (a) because they were “purposely constructed or converted to be a separate and self-contained set of private living quarters” – even though their use may be diverted to provide transient accommodation.

Exclusion of mobile homes (paras. 1.28, 1.34)

• Floating homes, mobile homes and park model trailers are not buildings and, thus, not residential properties.

Not a residential property prior to substantial completion (para. 1.30, 1.31)

• For purposes of both (a) and (b) of the definition, CRA considers that a property in construction does not become a residential property until “construction of the property is substantially completed (generally 90% or more) so that an individual could reasonably inhabit the property” – so that there is no reporting obligation for the property if on December 31 it has not yet become a residential property.
• In particular, although a bounded space that is intended to be a separate unit, in a building that will be severed into separately-owned condominium units under a registered plan, for use as a dwelling unit constitutes a residential condominium unit, it must be substantially completed by December 31 for the builder to have a reporting obligation.

Assessed value used even where excess land (para. 2.1)

• Where, for example, the assessed value of a 10 hectare plot of land reflects the value of land (9.5 hectares) that is not necessary for the use of the house on the land as a residence, the taxable value of that property nonetheless is based on that assessed value, unless an election is made to use the FMV of the residential property (which generally would only include the ½ hectare).

Allocation of assessed value (para. 2.2)

• The assessed value might be allocated between a detached house and a laneway house based on interior floor space (or some other method appropriate in the circumstances).

No requirement to complete assessed value if exemption applies and return is filed on time or no more than 8 months late (para. 3.1)

• A person is not required to report amounts on Line 280 (assessed value of the residential property) and Line 285 (most recent sale price) of Form UHT-2900 for a residential property for a calendar year in situations where:
  • no tax is payable in respect of the residential property for the calendar year due to the person’s ownership of the residential property being exempt from the UHT for the calendar year; and
  • the person files the return by December 31 of the following calendar year (for example, the return for the 2022 calendar year is filed by December 31, 2023).

Need claim only 1 exemption (paras. 3.2, 3.3)

• When filing a return, an owner need only claim one out of a number of applicable exemptions – although, in light of s. 47(2), the exemptions in s. 6(7)(c) to (f) may be considered less desirable.

Separate return for each property (para. 3.4)

• An affected owner of multiple residential properties on December 31 must file a separate return for each property rather than filing a single UHT return and attaching a spreadsheet.

Registered owner until sale reflected on title (para. 3.5)

• Where the closing of a sale occurs in late December and the documents for transfer of the registered title are submitted at that time, but not processed by the provincial land titles office until the next year, such affected owner is considered to still be the owner on December 31 and must file a return and pay tax if not exempted.

Electronic signature (para. 3.6)

• Handwritten signatures, block signatures and electronic signatures are all acceptable on UHT returns.

Bare trust can be a specified Canadian trust (para. 1.18)

• A corporation holding title to a residential property in Canada as bare trustee would be required to file a return, but its holding may be exempted if the trust is a specified Canadian trust.

Beneficiaries do not include contingent beneficiaries (para. 4.2)

• The reference to beneficiary does not include any contingent beneficiary of the trust (being “a person who may or will benefit if a primary beneficiary dies or otherwise loses rights as beneficiary”).

Look through trust beneficiary to its beneficiaries (para. 4.4)

• As a trust is not a person for UHT purposes, it is likely that where a trust is a beneficiary of another trust, the beneficiaries of the first trust are to be treated as beneficiaries of the second trust.

Individual cannot satisfy “use” test if holding as trustee (paras. 5.1, 5.2)

• Only individuals holding in their own capacity (rather than as partner or trustee) can satisfy the prescribed use condition in s. 2(3).

Qualifies if not winterized (para. 9.2)

• A residence that is not winterized (e.g., no sewer or septic system, no year-round power or water access, non-insulated water pipes, no permanent source of hear and lack of insulation) is not suitable for year-round use

“Public access” (paras. 9.3 to 9.6)

• “Public access” means “the way or means of approach to the residential property, such as a road, is maintained at public expense and under public control,” so that access only by boat, or a private road that is closed in the winter, wold not satisfy “public access.”

Deceased individual can be excluded owner (para.12.1)

• Given the implication of s. 6(7)(h) that a deceased individual still shown on title is a person, such person can also qualify as an “excluded owner.”

Deceased individual can be excluded owner (para.12.1)

• Given the implication of s. 6(7)(h) that a deceased individual still shown on title is a person, such person can also qualify as an “excluded owner.”

Property that has not been substantially completed is not exempted under s. 6(7)(k) (para. 13.2)

• Given that a property that has not been substantially completed on December 31 is not a residential property, it is effectively exempted on those grounds rather than under s. 6(7)(k).