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Questions and Answers About the Underused Housing Tax

Underused Housing Tax Notice UHTN15

September 2023

This page will be updated with additional questions and answers as they become available. Please check for updates periodically. 

This version replaces the one dated April 2023. In this notice, the Questions that relate to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax section has been updated with additional questions and answers: Questions 1.2.1, 1.2.2, 1.2.3, 1.3.1, 1.5.1, 1.8.1, 1.8.2, 1.10.1, 1.17.1 and 1.17.2. Additional information was also added to Questions 1.5, 1.6 and 1.7.

The Government of Canada has introduced an underused housing tax (UHT) on the ownership of vacant or underused housing in Canada. The Underused Housing Tax Act, which governs the UHT, received royal assent on June 9, 2022. The UHT took effect on January 1, 2022.

The purpose of this notice is to provide questions and answers regarding the application of the UHT. This notice supplements the previously issued UHT notices. For more comprehensive information, refer to the various Underused housing tax notices.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Underused Housing Tax Act (UHTA) and its regulations. The information in this publication does not replace the law found in the UHTA and its regulations.

Table of Contents

Questions that relate to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax.

Questions about persons

Question 1.1. Who or what is a person for underused housing tax (UHT) purposes?

The term person is not defined in the Underused Housing Tax Act (UHTA). In addition, the UHTA does not contain any provision deeming certain associations, relationships or other arrangements to be a person for UHT purposes.

Generally, a person is an individual; a human being. The Interpretation Act provides that, in every federal enactment, the term person, or any word or expression descriptive of a person, includes a corporation.

For UHT purposes, the Canada Revenue Agency (CRA) interprets the term person to mean an individual or a corporation.

Questions about partnerships

Question 1.2. What is a partnership?

The term partnership is not defined in the UHTA. Generally, a relationship that is a valid partnership under general law is treated as a partnership for UHT purposes. Whether a relationship is a partnership is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts.

Question 1.2.1. How does the CRA interpret the term partnership for UHT purposes?

For purposes of administering the UHTA in all parts of Canada (other than Quebec), the CRA interprets the term partnership to mean the relationship that exists between persons:

The above three criteria are fundamental for a relationship to be a valid partnership under general law. If any of the criteria are missing, then the relationship is not a valid partnership. Refer to Income Tax Folio S4-F16-C1, What is a Partnership? for information about the three fundamental criteria.

This interpretation is based on the legal definition of partnership that is found in most provincial partnership legislation. Also, it is consistent with how the CRA interprets the term partnership for income tax and GST/HST purposes.

Question 1.2.2. How does the CRA interpret the term partnership for purposes of administering the UHTA in Quebec?

For partnerships constituted in Quebec, the CRA interprets the term partnership based on the legal definition of contract of partnership found in article 2186 of the Civil Code of Québec.

Article 2186 of the Civil Code of Québec states that a "contract of partnership is a contract by which the parties, in a spirit of cooperation, agree to carry on an activity, including the operation of an enterprise, to contribute thereto by combining property, knowledge or activities and to share among themselves any resulting pecuniary profits".

Question 1.2.3. Why can the CRA not tell me if my particular situation constitutes a partnership?

As explained in Income Tax Folio S4-F16-C1, What is a Partnership?, whether a partnership exists is a mixed question of fact and law.

The existence of a partnership depends on the true contract and intention of the parties as determined by examining all of the facts of the case. An enquiry must be made into whether the objective, documentary evidence and the surrounding facts, including what the parties actually did, are consistent with a subjective intention to carry on business in common with a view to profit.

In short, one has to consider the parties’ intentions, their actions or conduct, the facts or circumstances of the arrangement, and any evidence. All of these must be examined when determining whether persons are carrying on a business in common with a view to profit.

Although two or more persons may declare themselves as having a partnership, that does not, by itself, mean that they have created a partnership. A court might decide that the persons have not created a partnership, especially if their actions, the facts and the evidence do not support their stated intention to carry on business in common with a view to profit.

Conversely, where two or more persons declare themselves as not having a partnership, that does not, by itself, mean that they have not created a partnership. A court might decide that they have, in law, created a partnership, especially if their actions, the facts and the evidence support that they are carrying on business in common with a view to profit.

Please note, the fact that two persons own a property together does not, of itself, create a partnership.

Question 1.3. Is a partnership a person for UHT purposes?

No. A partnership is not a person for UHT purposes.

A person, such as an individual or a corporation, that on December 31 of a calendar year is an owner (other than an excluded owner) of a residential property in their capacity as a partner of a partnership has to:

If a partnership is a specified Canadian partnership, a partner’s ownership may be exempt from the UHT.

Question 1.3.1. It is common for a partnership constituted in Quebec to be identified as an owner of a residential property in the Quebec land register. In that situation, who does the CRA consider to be an owner of the residential property?

Where a partnership constituted in Quebec is identified as an owner in respect of a residential property in the Quebec land register on December 31 of a calendar year, it is the CRA’s position that the following persons could reasonably be considered to be an owner of the residential property for UHT purposes:

However, where one or more partners of a partnership constituted in Quebec is identified as an owner in respect of a residential property in the Quebec land register on December 31 of a calendar year, it is the CRA’s position that that partner is (or those partners are) an owner of the residential property for UHT purposes.

Question 1.4. How do I know if a relationship between two or more persons constitutes a partnership?

Whether a relationship is a partnership is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts. Please consult the relevant provincial legislation governing partnerships for guidance on whether a relationship is a partnership.

Income Tax Folio S4-F16-C1, What is a Partnership? may be a useful resource. If a relationship is a partnership under general law and is treated as a partnership for Canadian income tax purposes, then it is likely treated as a partnership for UHT purposes.

Question 1.5. Two spouses are identified in a provincial land registration system as joint owners of a real or immovable property located in Canada. Does that mean the two spouses are in a partnership?

Not necessarily. Some provincial partnership legislation provides that joint tenancy, tenancy in common, joint property, common property or part ownership does not, of itself, create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.

Whether a relationship is a partnership is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts. 

As indicated in Question 1.2.1, for a relationship to be a valid partnership under general law, persons must be carrying on a business in common with a view to profit. If no business is carried on, or if a business is carried on but not in common, then the relationship is not a valid partnership.

Question 1.5.1. Two individuals in a familial relationship are identified in a provincial land registration system as joint owners of a real or immovable property located in Canada. Does that mean they are in a partnership?

No. A familial relationship between two or more individuals who own a residential property does not, of itself, create a partnership, regardless of whether the persons are related by:

As indicated in Question 1.2.1, for a relationship to be a valid partnership under general law, persons must be carrying on a business in common with a view to profit. If no business is carried on, or if a business is carried on but not in common, then the relationship is not a valid partnership.

Question 1.6. An individual is identified in a provincial land registration system as the sole owner of a real or immovable property located in Canada. The individual rents the property to an arm’s length person and shares the rental income with their spouse. Does that mean the individual and their spouse are in a partnership?

Not necessarily. Some provincial partnership legislation provides that the sharing of gross returns does not, of itself, create a partnership, whether the persons sharing such returns have (or have not) a joint or common right or interest in any property from which (or from the use of which) the returns are derived.

Whether a relationship is a partnership is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts.

As indicated in Question 1.2.1, for a relationship to be a valid partnership under general law, persons must be carrying on a business in common with a view to profit. If no business is carried on, or if a business is carried on but not in common, then the relationship is not a valid partnership.

Question 1.7. Two common-law partners are identified in a provincial land registration system as joint owners of a real or immovable property located in Canada. They rent the property to an arm’s length person. For Canadian income tax purposes, the two common-law partners each file Form T776, Statement of Real Estate Rentals, indicating that they are in a partnership. Does that mean the two common-law partners are in a partnership for UHT purposes?

The UHTA and the Income Tax Act are independent statutes. However, if two individuals characterize their relationship as a partnership for Canadian income tax purposes, it may be difficult for them to characterize their relationship as something else for UHT purposes.

Whether a relationship is a partnership is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts.

As indicated in Question 1.2.1, for a relationship to be a valid partnership under general law, persons must be carrying on a business in common with a view to profit. If no business is carried on, or if a business is carried on but not in common, then the relationship is not a valid partnership.

Question 1.8. On December 31 of a calendar year, two individuals (both of whom are citizens of Canada) are identified in a provincial land registration system as joint owners of a property (for example, a residential condominium unit) located in Canada. Each individual has determined that they are an owner of the residential property in their capacity as a partner of a partnership. Does each individual have to file a UHT return for the residential property for the calendar year?

Yes. Each individual is a citizen of Canada who is an owner of the residential property in their capacity as a partner of a partnership. Therefore, each of them is an affected owner for UHT purposes. As an affected owner, each of them has to:

If the partnership is a specified Canadian partnership, the partners’ ownership may be exempt from the UHT.

Question 1.8.1. What do the words in their capacity as a partner of a partnership mean?

The term capacity is not defined in the UHTA. For UHT purposes, the CRA interprets the term capacity to mean the position, function or status in which a person holds an interest in real or immovable property. The capacity in which a person is an owner of real or immovable property may not necessarily be indicated in a land registration system.

Question 1.8.2. What conditions might an individual have to consider in determining whether they are an owner of a residential property in their capacity as a partner of a partnership?

Most provincial partnership legislation provides that partnership property consists of property contributed to the partnership, as well as property acquired on account of the partnership or for the purpose and in the course of the partnership business.

However, as indicated in Question 1.3, a partnership is not a person. Consequently, a partnership cannot be identified as a legal (titled) owner of real property in a land registration system, other than in Quebec. As a result, where real property is partnership property, a partner of the partnership is usually the person that is identified as a legal (titled) owner of the real property in the land registration system.

The following are conditions that an individual might have to consider in determining whether they are an owner of a residential property in their capacity as a partner of a partnership:

If all of the above conditions are met, the individual is an owner of the residential property in their capacity as a partner of a partnership.

Refer to Income Tax Folio S4-F16-C1, What is a Partnership? for information about the characteristics of a partner.

Questions about trusts

1.9. What is a trust?

The term trust is not defined in the UHTA. Generally, an arrangement that is a valid trust under general law is treated as a trust for UHT purposes. Whether an arrangement is a trust is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts.

1.10. Is a trust a person for UHT purposes?

No. A trust is not a person for UHT purposes.

A person, such as an individual or a corporation, that on December 31 of a calendar year is an owner (other than an excluded owner) of a residential property in their capacity as a trustee of a trust has to:

If a trust is a specified Canadian trust, a trustee’s ownership may be exempt from the UHT.

1.10.1. It is common for a trust constituted in Quebec to be identified as an owner of a residential property in the Quebec land register. In that situation, who does the CRA consider to be an owner of the residential property?

Where a trust constituted in Quebec is identified as an owner in respect of a residential property in the Quebec land register on December 31 of a calendar year, it is the CRA’s position that the following persons could reasonably be considered to be an owner of the residential property for UHT purposes:

However, where one or more trustees of a trust constituted in Quebec is identified as an owner in respect of a residential property in the Quebec land register on December 31 of a calendar year, it is the CRA’s position that that trustee is (or those trustees are) an owner of the residential property for UHT purposes.

1.11. How do I know if an arrangement constitutes a trust?

A trust arrangement is usually governed by a written document. Whether an arrangement is a trust is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts.

1.12. What is a bare trust?

The term bare trust is not defined in the UHTA. Generally, a bare trust is 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. The beneficiaries of the trust hold the beneficial ownership of the trust property. Whether a trust is a bare trust is a question of fact. Canada’s tax system is based on self-assessment, which requires persons to determine the facts themselves. The CRA then assists persons to understand how the tax laws apply to a given set of facts.

1.13. Paragraph (b) of the definition of excluded owner in section 2 of the UHTA refers to 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. Does the reference to "trustee of a trust" include a trustee of a bare trust?

Yes. For purposes of paragraph (b) of the definition of excluded owner, the CRA interprets the word trust to include a bare trust and interprets the word trustee to include a trustee of a bare trust.

1.14. The definition of owner in section 2 of the UHTA refers to a person that could reasonably be considered to be an owner in respect of the residential property based on a land registration system or other similar system. Does the reference "could reasonably be considered to be an owner" include the beneficiaries of a trust?

No. A person that "could reasonably be considered to be an owner in respect of the residential property based on a land registration system or other similar system" does not include a beneficiary of a trust. Different provinces and territories use different systems to register the ownership of land. For example, some jurisdictions use a deed-registration system instead of a land titles system. A person who could reasonably be considered to be an owner of a residential property based on a deed-registration system is an owner for UHT purposes.

1.15. Is British Columbia’s private companies transparency register a "land registration system or other similar system" for purposes of the definition of owner in section 2 of the UHTA?

No. British Columbia’s private companies transparency register identifies the actual individuals who own and control private companies in British Columbia. Private companies in British Columbia are required to keep and maintain a transparency register of beneficial owners, including individuals who have direct or indirect control of the company or its shares.

1.16. On December 31 of a calendar year, an individual who is a citizen of Canada is identified in a provincial land registration system as the owner of a property (for example, a detached house) located in Canada. The individual is an owner of the residential property in their capacity as a trustee of a trust. Does the individual have to file a UHT return for the residential property for the calendar year?

Yes. The individual is a citizen of Canada who is an owner of the residential property in their capacity as a trustee of a trust. Therefore, the individual is an affected owner for UHT purposes. As an affected owner, the individual has to:

If the trust is a specified Canadian trust, the trustee’s ownership may be exempt from the UHT.

1.17. On December 31 of a calendar year, two individuals (both of whom are citizens of Canada) are identified in a provincial land registration system as joint owners of a property (for example, a detached house) located in Canada. Each individual is an owner of the residential property in their capacity as a trustee of a trust. Does each individual have to file a UHT return for the residential property for the calendar year?

Yes. Each individual is a citizen of Canada who is an owner of the residential property in their capacity as a trustee of a trust. Therefore, each of them is an affected owner for UHT purposes. As an affected owner, each of them has to:

If the trust is a specified Canadian trust, the trustee’s ownership may be exempt from the UHT.

1.17.1. On December 31 of a calendar year, two individuals (both of whom are citizens of Canada) are identified in a provincial land registration system as joint owners of a property (for example, a detached house) located in Canada. The individuals are related by a parent-adult child relationship. Originally, the parent was the sole owner of the residential property but added the adult child on title as a joint tenant for estate planning purposes. The parent uses the residential property as their primary place of residence. Does each individual have to file a UHT return for the residential property for the calendar year?

The answer to this question depends on the circumstances surrounding the parent’s decision to add the adult child on title as a joint tenant.

If, for example, the parent added the adult child on title as a joint tenant because the parent has gifted the residential property to the adult child, then the parent and adult child are generally excluded owners. As excluded owners, they do not have to:

If, for example, the parent added the adult child on title as a joint tenant because the parent asked the adult child to hold the residential property in trust in favour of the parent, then the parent is generally an excluded owner. However, the adult child is generally 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) and, therefore, an affected owner. As an affected owner, the adult child has to:

If the trust is a specified Canadian trust, the trustee’s ownership may be exempt from the UHT.

Despite a parent’s declaration about their decision to add their adult child on title as a joint tenant (for example, to gift the residential property to their adult child, or to have their adult child hold the residential property in trust), a court might decide differently if there is insufficient evidence to support the parent’s declaration.

1.17.2. On December 31 of a calendar year, two individuals (both of whom are citizens of Canada) are identified in a provincial land registration system as joint owners of a property (for example, a residential condominium unit) located in Canada. The individuals are related by a parent-adult child relationship. The adult child uses the residential property as their primary place of residence. The parent is on title for financing purposes only. Does each individual have to file a UHT return for the residential property for the calendar year?

The answer to this question depends on the circumstances surrounding how the parent and child have structured their ownership of the residential property.

If, for example, the parent is a co-owner of the residential property (but not as a partner of a partnership or as a trustee of a trust), then the parent and adult child are generally excluded owners. As excluded owners, they do not have to:

If, for example, the parent and adult child have an agreement setting out that the parent is holding the residential property in trust in favour of the adult child, then the adult child is generally an excluded owner. However, the parent is generally an owner of the residential property in their capacity as a trustee of a trust and, therefore, an affected owner. As an affected owner, the parent has to:

If the trust is a specified Canadian trust, the trustee’s ownership may be exempt from the UHT.

1.18. On December 31 of a calendar year, a corporation is identified in a provincial land registration system as the owner of a property (for example, a duplex) located in Canada. The corporation has determined that it is not an excluded owner for UHT purposes. The corporation does not have beneficial ownership of the residential property, but rather owns the residential property in its capacity as a trustee of a bare trust. Does the corporation have to file a UHT return for the residential property for the calendar year?

Yes. The corporation is an affected owner of the residential property in its capacity as a trustee of a trust. Therefore, the corporation has to:

If the trust is a specified Canadian trust, the trustee’s ownership may be exempt from the UHT.

Questions about corporations

1.19. Paragraph (c) of the definition of excluded owner in section 2 of the UHTA refers to 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. Does paragraph (c) include a corporation that was not incorporated under the laws of Canada or a province, but that was continued under the laws of Canada or a province?

No. Paragraph (c) does not include a corporation that was not incorporated under the laws of Canada or a province.

Questions about residential property

Generally, the following questions relate to the characterization of property as residential property for UHT purposes.

Explanations of the examples in Underused Housing Tax Notice UHTN1

1.20. Why is a quadruplex not a residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists a quadruplex (that is, a building that has four dwelling units) as an example of a building that is not a residential property for UHT purposes.

Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The example of a quadruplex in Underused Housing Tax Notice UHTN1 is meant to illustrate that, for purposes of paragraph (a) of the definition of residential property, a building is not a residential property where both of the following conditions are met:

1.21. Why is a high-rise apartment building not a residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists a high-rise apartment building as an example of a building that is not a residential property for UHT purposes.

Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The example of a high-rise apartment building in Underused Housing Tax Notice UHTN1 is meant to illustrate that, for purposes of paragraph (a) of the definition of residential property, a building is not a residential property where both of the following conditions are met:

The height of the building or the number of storeys is irrelevant to the example.

Please note, the example of a high-rise apartment building in Underused Housing Tax Notice UHTN1 is not meant to include a building that contains dwelling units that are (or are intended to be) separate parcels or other divisions of real or immovable property owned (or intended to be owned) apart from any other part of the building. To be clear, a high-rise building in which the dwelling units are owned separately under distinct legal titles is not meant to be included in this example, even if the building is operated like a rental apartment building. The dwelling units in such a building are included in paragraph (b) of the definition of residential property.

1.22. Why is a building that is primarily (more than 50%) for retail or office use not a residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists a building that is primarily (more than 50%) for retail or office use and that contains an apartment as an example of a building that is not a residential property for UHT purposes.

Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The example in Underused Housing Tax Notice UHTN1 is meant to illustrate that, for purposes of paragraph (a) of the definition of residential property, a building is not a residential property where all of the following conditions are met:

1.23. Why is a commercial condominium unit not a residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists a commercial condominium unit as an example of a premises that is not a residential property for UHT purposes.

Paragraph (b) of the definition of residential property in section 2 of the UHTA 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, a person cannot own the building as a whole under one legal title but can own the parts/dwelling units in the building separately under distinct legal titles.

The example of a commercial condominium unit in Underused Housing Tax Notice UHTN1 is meant to illustrate that, for purposes of paragraph (b) of the definition of residential property, a space or unit in a residential condominium complex is not a residential property where the space or unit is not a residential condominium unit.

The word commercial, as used in the context of the example, is meant to refer to a space or unit in a residential condominium complex that is not a dwelling unit. An example of a commercial condominium unit is a coffee shop or store located on the ground floor of a residential condominium complex.

The word commercial, as used in the context of the example, is not meant to describe a residential condominium unit (located in a residential condominium complex) that is used for making short-term or long-term rentals to occupants. Such residential condominium units are residential property for UHT purposes.

1.24. Why is a boarding house or lodging house not a residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists boarding houses and lodging houses as examples of buildings that are not residential property for UHT purposes.

Paragraphs (a) and (b) of the definition of residential property in section 2 of the UHTA include the following properties, respectively:

The examples of boarding houses and lodging houses in Underused Housing Tax Notice UHTN1 are meant to illustrate properties that do not fall within either of paragraphs (a) or (b) of the definition of residential property.

Typically, boarding houses and lodging houses are buildings that are purposely constructed or converted to provide sleeping or lodging accommodation on a transient or intermittent basis to several unrelated persons at once in separate rooms. Typically, such rooms are not separate and self-contained sets of private living quarters. Certain facilities or rooms (such as kitchen facilities or bathrooms) must be shared by the occupants or may not even be present in the building. In other words, boarding houses and lodging houses are not made up of dwelling units, as defined in section 2 of the UHTA. Therefore, boarding houses and lodging houses are not residential properties for UHT purposes.

1.25. Why are commercial cottages, cabins and chalets not residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists commercial cottages, cabins and chalets (that is, those that are used by the operator of an establishment to provide lodging to several unrelated business or leisure travellers at once in separate cottages, cabins or chalets) as examples of buildings that are not residential property for UHT purposes.

Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The example of commercial cottages, cabins and chalets in Underused Housing Tax Notice UHTN1 is meant to illustrate that, where buildings were purposely constructed or converted to be something other than a residence, they are not property described in paragraph (a) of the definition of residential property even though both of the following conditions are met:

The word commercial, as used in the context of the example, is meant to mean not a residence. It was not meant as a reference to the ownership of the cottages, cabins or chalets.

Typically, the operator of commercial cottages, cabins or chalets is engaged in an active for-profit business of providing sleeping or lodging accommodation on a transient or intermittent basis to several unrelated business or leisure travellers at once in separate cottages, cabins or chalets that are located in rural or touristic areas. In addition, the operator actively advertises and holds itself out as being an establishment within the travel and tourism industry, and it is commonly accepted by that industry as being an establishment within it. In short, the establishment was designed and constructed to function like a motel, with the main difference being that the sleeping or lodging accommodation is provided in independent cottages, cabins or chalets, as opposed to being provided in guest rooms or suites.

Please note, the establishment contemplated in the example in Underused Housing Tax Notice UHTN1 is one where the cottages, cabins or chalets are either:

Cottages, cabins or chalets that are situated on distinct parcels or other divisions of real or immovable property that are distant or not touching each other are considered property that is described in paragraph (a) of the definition of residential property.

Any cottage, cabin or chalet that was purposely constructed or converted to be a separate and self-contained set of private living quarters is also considered property that is described in paragraph (a) of the definition of residential property. The fact that the owner of such a cottage, cabin or chalet chooses to divert the use of the building for providing sleeping or lodging accommodation on a transient or intermittent basis (for example, in the provision of accommodation via an accommodation-sharing platform) does not mean that the property is not a residential property for UHT purposes.

1.26. Why are hotels, motels and inns not residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists hotels, motels and inns as examples of buildings that are not residential property for UHT purposes.

Paragraphs (a) and (b) of the definition of residential property in section 2 of the UHTA include the following properties, respectively:

The examples of hotels, motels and inns in Underused Housing Tax Notice UHTN1 are meant to illustrate properties that do not fall within either of paragraphs (a) or (b) of the definition of residential property.

Typically, hotels, motels and inns are buildings that are purposely constructed or converted to provide sleeping or lodging accommodation on a transient or intermittent basis to several unrelated persons at once in separate rooms. Typically, such rooms are not separate and self-contained sets of private living quarters. In other words, hotels, motels and inns are not made up of dwelling units, as defined in section 2 of the UHTA. Therefore, hotels, motels and inns are not residential properties for UHT purposes.

1.27. Is a detached house that is used in the operation of a bed and breakfast a residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists a bed and breakfast as an example of a building that is not a residential property for UHT purposes. However, for the purposes of that particular example, the CRA makes an assumption that the building was purposely constructed or converted to provide sleeping or lodging accommodation on a transient or intermittent basis to several unrelated persons at once in separate rooms (that is, similar to the structure of a hotel, motel or inn). However, most bed and breakfasts are not structured similar to a hotel, motel or inn. Most bed and breakfasts are detached houses.

Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The CRA considers a building to be a property described in paragraph (a) of the definition of residential property in section 2 of the UHTA where both of the following conditions are met:

Generally, a detached house is a building that was purposely constructed or converted to be a separate and self-contained set of private living quarters. The fact that the owner of such a building chooses to divert the use of the building (or the use of certain rooms in the building) for providing sleeping or lodging accommodation on a transient or intermittent basis (for example, in the operation of a bed and breakfast) does not mean that the property is not a residential property for UHT purposes.

A building that was constructed or converted as a detached house is regarded as such for UHT purposes, provided the building has not been altered, renovated or converted to the extent that the building loses its structural characteristics or internal configuration as a detached house, or loses its suitability as a residence.

1.28. Why are floating homes, mobile homes and park model trailers not residential property for UHT purposes?

Underused Housing Tax Notice UHTN1 lists floating homes, mobile homes and park model trailers as examples of buildings that are not residential property for UHT purposes.

Paragraphs (a) and (b) of the definition of residential property in section 2 of the UHTA include the following properties, respectively:

Floating homes, mobile homes and park model trailers are not buildings for UHT purposes. They are movable structures.

Questions from builders of residential properties

1.29. When does a newly constructed property become a residential property for UHT purposes?

The CRA considers a newly constructed property to be a residential property for UHT purposes when construction of the property is substantially completed (generally 90% or more) so that an individual could reasonably inhabit the property. A residential property may be considered to be substantially completed even if there are outstanding minor repairs, adjustments or upgrades since this does not reasonably impair the use and enjoyment of the property as a place of residence. Whether the construction of a property is substantially completed on a particular day is a question of fact, and an owner of a property (such as a builder of a property) must make that determination on a case-by-case basis.

This position applies to both paragraphs (a) and (b) of the definition of residential property in section 2 of the UHTA.

Also, to be clear, an owner of a property does not have an obligation to file a return for a property for a calendar year if the construction of the property is not substantially completed on December 31 of the calendar year.

1.30. How does the response in Question 1.29 apply to residential condominium units?

Paragraph (b) of the definition of residential property in section 2 of the UHTA includes, among others, a property that is a part of a building that is a residential condominium unit 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.

The term residential condominium unit is not defined in the UHTA. 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:

Consequently, a condominium complex does not necessarily have to be registered as a condominium for the units situated therein to be regarded as residential condominium units and, therefore, to be regarded as property for purposes of paragraph (b) of the definition of residential property. To be clear, a bounded space in a building is a property for UHT purposes provided that all of the following conditions are met:

Although intention is enough to make a bounded space a residential condominium unit, the construction of a particular unit must be substantially completed on December 31 of a calendar year for an owner of the property (such as a builder of the property) to have an obligation to file a return for the property for the calendar year.

1.31. On December 31 of a calendar year, a person is identified in a provincial land registration system as the owner of a property located in Canada. On that day, the person is in the process of constructing a detached house on the property, but the construction is only 80% completed and an individual could not reasonably inhabit the property. Assuming the person is not an excluded owner, does the person have to file a UHT return for the property for the calendar year?

No. The person does not have to file a UHT return for the property for the calendar year because, on December 31 of the calendar year, construction of the property is not substantially completed and, therefore, the property is not a residential property for UHT purposes.

Questions from condominium and strata corporations

1.32. A residential condominium complex contains two bounded spaces that are each designated as a separate unit in the complex on a registered condominium plan. Each unit meets the definition of dwelling unit in section 2 of the UHTA. The first unit is used to provide accommodation for the onsite building superintendent. The second unit serves as a guest suite that residents of the building may reserve on a short-term basis. Each unit is a separate parcel or other division of real or immovable property that is owned apart from any other unit in the building. Are the two units residential properties for UHT purposes?

Yes. Paragraph (b) of the definition of residential property in section 2 of the UHTA includes, among others, a property that is a part of a building that is a residential condominium unit 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.

The term residential condominium unit is not defined in the UHTA. 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:

The two units are residential condominium units and, therefore, are residential properties for UHT purposes.

The fact that the second unit serves as a guest suite that residents of the building may reserve on a short-term basis does not exclude it from being a residential property for UHT purposes.

1.33. A residential strata complex contains a bounded space that meets the definition of dwelling unit in section 2 of the UHTA. However, the bounded space is not designated as a separate unit in the complex on a registered strata lot plan. To be clear, the bounded space is not a separate parcel or other division of real or immovable property that is owned apart from any other unit in the building and, therefore, it is not separately titled in the provincial land registration system. The bounded space serves as a guest suite that residents of the building may reserve on a short-term basis. Is the bounded space a residential property for UHT purposes?

No. The term residential condominium unit is not defined in the UHTA. 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:

Although the bounded space meets the definition of dwelling unit in section 2 of the UHTA, the bounded space is not 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. Consequently, it is not a residential condominium unit and, therefore, it is not a property included in paragraph (b) of the definition of residential property.

Questions about accommodations for temporary foreign workers

1.34. The operator of a farm hires temporary foreign workers who will perform labour services on a farm. The operator of the farm is required to provide accommodation to the temporary foreign workers while they are employed in Canada. The operator of the farm provides accommodation to a group of temporary foreign workers in a mobile home. Is the mobile home a residential property for UHT purposes?

No. Paragraphs (a) and (b) of the definition of residential property in section 2 of the UHTA include the following properties, respectively:

Mobile homes are not buildings for UHT purposes. They are movable structures.

1.35. The operator of a farm hires temporary foreign workers who will perform labour services on a farm. The operator of the farm is required to provide accommodation to the temporary foreign workers while they are employed in Canada. The operator of the farm provides accommodation to a group of temporary foreign workers in a dormitory-type building. Is the dormitory-type building a residential property for UHT purposes?

No. Generally, a dormitory-type building is characterized by communal kitchen facilities, bathrooms and living areas. Depending on the design of the building, sleeping quarters may be private (that is, one person per room) or semi-private (for example, two persons per room).

Typically, the accommodation provided to the occupants of a dormitory-type building is not provided in separate and self-contained sets of private living quarters. To be clear, dormitory-type buildings are not made up of dwelling units, as defined in section 2 of the UHTA. Therefore, dormitory-type buildings are not residential properties for UHT purposes.

1.36. The operator of a farm hires temporary foreign workers who will perform labour services on a farm. The operator of the farm is required to provide accommodation to the temporary foreign workers while they are employed in Canada. The operator of the farm provides accommodation to a group of temporary foreign workers in a single-unit detached house. Is the single-unit detached house a residential property for UHT purposes?

Yes. Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The CRA considers a building to be a property described in paragraph (a) of the definition of residential property in section 2 of the UHTA where both of the following conditions are met:

Generally, a detached house is a building that was purposely constructed or converted to be a separate and self-contained set of private living quarters. The fact that the owner of such a building chooses to divert the use of the building (or the use of certain rooms in the building) for providing sleeping or lodging accommodation on a transient or intermittent basis (for example, in the provision of accommodation to a group of temporary foreign workers) does not mean that the property is not a residential property for UHT purposes.

A building that was constructed or converted as a detached house is regarded as such for UHT purposes, provided the building has not been altered, renovated or converted to the extent that the building loses its structural characteristics or internal configuration as a detached house, or loses its suitability as a residence.

Questions about accommodation-sharing platforms

1.37. A detached building has the structural characteristics and internal configuration of a two-storey two-unit house (that is, a duplex). The two dwelling units that constitute the building are fully furnished and have traditionally been rented to tenants as a place of residence. The owner decides to list the two dwelling units on an accommodation-sharing platform. Once listed on the accommodation-sharing platform, neither of the two dwelling units is used as a place of residence for individuals, but easily could be without any alterations or renovations to the property. Is the duplex a residential property for UHT purposes?

Yes. Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The CRA considers a building to be a property described in paragraph (a) of the definition of residential property in section 2 of the UHTA where both of the following conditions are met:

Generally, a detached house is a building that was purposely constructed or converted to be a separate and self-contained set of private living quarters. The fact that the owner of such a building chooses to divert the use of the building (or the use of certain rooms or dwelling units in the building) for providing sleeping or lodging accommodation on a transient or intermittent basis (for example, in the provision of accommodation via an accommodation-sharing platform) does not mean that the property is not a residential property for UHT purposes.

A building that was constructed or converted as a detached house is regarded as such for UHT purposes, provided the building has not been altered, renovated or converted to the extent that the building loses its structural characteristics or internal configuration as a detached house, or loses its suitability as a residence.

1.38. How does the response in Question 1.37 apply to residential condominium units?

Paragraph (b) of the definition of residential property in section 2 of the UHTA 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.

The fact that a person chooses to divert a residential condominium unit for providing sleeping or lodging accommodation on a transient or intermittent basis (for example, in the provision of accommodation via an accommodation-sharing platform) does not mean that the property is not a residential property for UHT purposes.

Questions from other property owners

1.39. Is vacant land a property that is subject to the UHT?

No. Paragraphs (a), (b) and (c) of the definition of residential property in section 2 of the UHTA include the following properties, respectively:

Vacant land is not included in either of paragraphs (a) or (b) of the definition of residential property. In addition, there currently is no prescribed property for purposes of paragraph (c) of the definition of residential property.

1.40. A building has the structural characteristics and internal configuration of a single-unit detached house (that is, a bungalow). The owner decides to use the building in the operation of an accounting practice. The rooms that would otherwise be bedrooms are used as office space. They still have the original closets, but the beds and other furnishings have been removed. The room that would otherwise be a living room is used as a boardroom. The room that would otherwise be a kitchen is used as a lunchroom and still has the original cupboards, counters, refrigerator, stove and sink. The bathrooms continue to be used for personal hygiene/sanitation and still have the original cabinets, toilets, sinks and tubs/showers. No part of the building is used as a place of residence for individuals, but easily could be without any alterations or renovations to the property. Is the bungalow a residential property for UHT purposes given that it is not used as a place of residence?

Yes. Paragraph (a) of the definition of residential property in section 2 of the UHTA 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 building is not made up of dwelling units that are separate parcels or other divisions of real or immovable property. Put differently, a person can own the building as a whole under one legal title but cannot own any dwelling units in the building separately under distinct legal titles.

The CRA considers a building to be a property described in paragraph (a) of the definition of residential property in section 2 of the UHTA where both of the following conditions are met:

Generally, a detached house is a building that was purposely constructed or converted to be a separate and self-contained set of private living quarters. The fact that the owner of such a building chooses to divert the use of the building for the operation of an accounting practice does not mean that the property is not a residential property for UHT purposes.

A building that was constructed or converted as a detached house is regarded as such for UHT purposes, provided the building has not been altered, renovated or converted to the extent that the building loses its structural characteristics or internal configuration as a detached house, or loses its suitability as a residence.

1.41. A building has the structural characteristics and internal configuration of a two-storey single-unit house. The owner decides to convert the building so that it can be used in the operation of a law practice. The rooms that were bedrooms are gutted and enlarged and subsequently used as office space. The room that was the living room is reconfigured and subsequently used as a boardroom. The room that was the dining room has been gutted and redesigned as a reception area. The room that was the kitchen has been gutted and redesigned with a smaller footprint. It no longer contains space to store food and cooking utensils and it no longer has space to prepare meals. It has a small sink for rinsing dirty dishes, a small refrigerator and a microwave to reheat lunches. The room that was the bathroom has been gutted and redesigned. It no longer has a tub or shower and there now are several enclosed private toilet stalls and a common area for handwashing. No part of the building is used as a place of residence for individuals, and reasonably could not be used as such without alterations, renovations or conversion. Is the property a residential property for UHT purposes?

No. Although the building was originally constructed having the structural characteristics and internal configuration of a detached house and was originally suitable as a residence, the building has since been altered, renovated or converted to the extent that it has lost its structural characteristics and internal configuration as a detached house, and has lost its suitability as a residence.

1.42. A cottage does not contain a private bath. Is the property a residential property for UHT purposes?

No. For a cottage to be a residential property for UHT purposes, it must contain a dwelling unit. The term dwelling unit is defined in section 2 of the UHTA to mean a residential unit that contains private kitchen facilities, a private bath and a private living area. Since the cottage does not include a private bath, it is not a dwelling unit and, therefore, is not a residential property for UHT purposes.

1.43. Is a long-term care facility a residential property for UHT purposes?

The UHT applies to residential properties that take either of the following structural forms:

A dwelling unit is a single self-contained set of rooms (in a building) that is distinguished from any other such set of rooms in the building, and that is characteristic of, and suitable as, a residence. The self-contained set of rooms must include private kitchen facilities, a private bath and a private living area.

Rooms in a long-term care home rarely meet the definition of dwelling unit in section 2 of the UHTA. Therefore, most long-term care homes are not residential properties for UHT purposes.

Even if the rooms in a long-term care home are dwelling units, the building itself would likely contain more than three dwelling units. Therefore, the long-term care home would still not be a residential property for UHT purposes.

Questions that relate to Underused Housing Tax Notice UHTN2, Calculating the Underused Housing Tax Payable

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN2, Calculating the Underused Housing Tax Payable.

Questions about taxable value

2.1. On December 31 of a calendar year, a corporation is the only person identified in a land registration system as an owner of a property (for example, a detached house) that is located in Canada. The detached house is situated on a 10-hectare parcel of land, but only a half hectare of land subjacent and immediately contiguous to the detached house is considered to be reasonably necessary for the building’s use and enjoyment as a place of residence for individuals. The corporation received a property assessment notice for the calendar year from an authority that establishes the assessed value of real property for purposes of calculating the municipal property tax. The property assessment notice states that the full assessed value of the 10-hectare parcel of land (including the detached house) for the year is $900,000. The corporation has determined that its ownership of the residential property does not qualify for an exemption for the calendar year. For purposes of calculating the UHT payable for the calendar year, does the corporation report $900,000 as the assessed value of the residential property even though it includes nine and a half acres of land that is not reasonably necessary for the building’s use and enjoyment as a place of residence for individuals?

Yes. Subparagraph (b)(i) of the definition of taxable value in section 2 of the UHTA refers to the value established by an authority in respect of the residential property. The CRA interprets the words "in respect of" broadly to mean the full assessed value of the underlying real or immovable property of which the residential property is a part. Therefore, $900,000 is the assessed value in respect of the residential property.

Alternatively, the corporation can file an election with the CRA to use the fair market value of the residential property to calculate the UHT payable for a calendar year. Generally, the fair market value is based on the detached house and the half hectare of land subjacent and immediately contiguous to the detached house that is considered to be reasonably necessary for the building’s use and enjoyment as a place of residence for individuals.

2.2. On December 31 of a calendar year, an individual who is not a citizen or permanent resident of Canada is the only person identified in a provincial land registration system as an owner of a property located in Canada. The entire property is a single parcel or division of real or immovable property on which there are situated two residential properties: a detached house and a laneway house. The property assessment notice is for the entire property and does not contain separate assessed values for the two residential properties. The individual has determined that their ownership of the residential property does not qualify for an exemption for the calendar year. What amount does the individual report on Line 280 of the UHT returns as the assessed values of the residential properties?

The individual can prorate the full assessed value of the property between the two residential properties. In calculating the proportion of the full assessed value attributable to each residential property, the individual can choose a method that is appropriate in the circumstances, provided it is used consistently.

One such method could be to prorate the full assessed value of the property based on the interior floor space (that is, the finished living area) of each residential property. Generally, the individual would determine the number of square metres of interior floor space in each residential property and then add those two numbers together to determine the total square metres of interior floor space in both residential properties. The individual would then calculate a distinct prorating factor for each residential property. They would do this by dividing the number of square metres of interior floor space in a residential property by the total square metres of interior floor space in both residential properties. For each residential property, the individual would then multiply that residential property’s distinct prorating factor by the full assessed value of the property to determine the portion of the full assessed value of the property to declare on Line 280 of the UHT return for that residential property.

Alternatively, the individual can file elections with the CRA to use the fair market value of the residential properties to calculate their UHT payable for a calendar year.

2.3. On December 31 of a calendar year, an individual who is not a citizen or permanent resident of Canada is an owner of a property (for example, a detached house) that is located in Canada, and that is situated on a portion of land that the individual has continuous possession of under a long-term lease. The property assessment notice is issued to the landowner who also leases other portions of the land to other owners of residential properties. The individual has determined that their ownership of the residential property does not qualify for an exemption for the calendar year. What amount does the individual report on Line 280 of the UHT return as the assessed value of their residential property?

The individual should contact the authority that establishes the assessed value of residential properties in the individual’s jurisdiction. The authority may be able to supply the individual with the assessed value of a specific residential property if the individual submits a written request.

Alternatively, the individual can file an election with the CRA to use the fair market value of the residential property to calculate their UHT payable for a calendar year.

Questions that relate to Underused Housing Tax Notice UHTN3, Filing a Return and Paying the Underused Housing Tax

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN3, Filing a Return and Paying the Underused Housing Tax.

3.1. A person that is an affected owner of a residential property, located in Canada, on December 31 of a calendar year has to file a UHT return. The affected owner has determined that their ownership of the residential property qualifies for an exemption for the calendar year. When filing their UHT return for the calendar year, does the affected owner have to report amounts on Line 280 (assessed value of the residential property) and Line 285 (most recent sale price), given that no tax is payable?

No. A person is not required to report amounts on Lines 280 and 285 of a return (that is, Form UHT-2900) for a residential property for a calendar year in situations where both of the following conditions are met:

If either of these two conditions is not met, then the person is required to report amounts on Lines 280 and 285 of the return.

Please note, the second condition is not saying that the deadline for filing the UHT return is extended past April 30. It is saying that if the return is filed late (that is, past the April 30 deadline), it must be filed by December 31 or a person is required to report amounts on Lines 280 and 285 of the return.

When completing a return online, a person is required to report amounts on Lines 280 and 285 to proceed with completing other sections of the return. In the limited circumstances described above, a person may enter zeros on Lines 280 and 285 to complete the return.

3.2. A person that is an affected owner of a residential property, located in Canada, on December 31 of a calendar year has to file a UHT return. The affected owner has determined that their ownership of the residential property qualifies for two exemptions for the calendar year. When filing their UHT return for the calendar year, does the affected owner have to declare (and provide information about) both of the exemptions?

No. When filing a paper return by mail, the affected owner can choose to declare only one exemption (and provide the requisite information about that one exemption) or choose to declare all of the applicable exemptions (and provide the requisite information about all of those exemptions). When filing an electronic return online, the affected owner can declare only one exemption.

3.3. A person that is an affected owner of a residential property, located in Canada, on December 31 of a calendar year has to file a UHT return. The affected owner has determined that their ownership of the residential property qualifies for two exemptions for the calendar year. When filing their UHT return for the calendar year, are there any situations where it might be better to declare one exemption versus another?

Yes. If an affected owner fails to file their return for a residential property for a calendar year by December 31 of the following calendar year, there is an adjustment to the failure to file penalty calculation that could result in even higher penalties. The adjustment is applicable only to affected owners that declare one of the following exemptions for the calendar year:

Therefore, if an affected owner files their return after December 31 of the following calendar year, and if they have a choice of declaring an exemption other than one of the above six exemptions, it might be better for them to declare the other exemption.

3.4. A person is an affected owner of multiple residential properties, located in Canada, on December 31 of a calendar year. Can the affected owner file a single UHT return and attach a spreadsheet listing the requisite information about the multiple residential properties?

No. The affected owner has to file a separate return for each residential property.

3.5. A person is an affected owner of a residential property located in Canada. In October of a calendar year, the affected owner enters into an agreement of purchase and sale to sell the residential property. Final closing of the sale takes place on December 15 of the calendar year and, at that time, the affected owner transfers possession and beneficial ownership of the residential property to the purchaser. The affected owner’s lawyer prepares the transfer documents and submits the documents to the provincial land titles office. However, the provincial land titles office does not process the transfer documents until February of the following calendar year. Thus, on December 31 of the calendar year, the affected owner is the only person identified in the provincial land registration system as an owner of the property. Does the affected owner have to file a UHT return for the residential property for the calendar year?

Yes. On December 31 of the calendar year, the affected owner holds legal (titled) ownership of a residential property and, therefore, the affected owner has an obligation to file a return for the residential property for the calendar year. The affected owner also has an obligation 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.

3.6. Will the CRA accept electronic signatures on UHT returns?

Yes. Handwritten signatures, block signatures and electronic signatures are all acceptable.

Where the affected owner filing a return is a corporation, the return must be signed by an authorized person.

Where the affected owner filing the return is an individual, the return must be signed by the affected owner or their legal representative. The return must not be signed by an authorized contact person, unless they are also a legal representative.

3.7. I am an individual who is not a citizen or permanent resident of Canada. As an affected owner of a residential property in Canada, I understand that I need a CRA individual tax number (ITN) for non-residents to file my UHT return. What should I do if I do not have an ITN by April 30 when the UHT return is due?

If you have already submitted an ITN application (that is, Form T1261, Application for a Canada Revenue Agency Individual Tax Number (ITN) for Non-Residents) and you are concerned that you will not have your ITN by April 30 when the return is due, you should file the return by mail by April 30 to allow for the return to be filed on time. In addition, you should attach a note to the return stating that you have already requested an ITN, and provide details such as the date that you submitted the ITN application and the tax centre to which you submitted it.

If you have not already submitted an ITN application, you should send the entire package (that is, the ITN application and the UHT return) to the Winnipeg or Sudbury Tax Centre (as applicable) by April 30 to allow for the return to be filed on time. The ITN application will then be forwarded to the applicable unit where the ITN will be created.

Questions that relate to Underused Housing Tax Notice UHTN4, Exemptions for Specified Canadian Partnerships, Trusts and Corporations

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN4, Exemptions for Specified Canadian Partnerships, Trusts and Corporations.

Questions about specified Canadian corporations

4.1. Is a Canadian-controlled private corporation for Canadian income tax purposes a specified Canadian corporation for UHT purposes?

The term specified Canadian corporation is defined in section 2 of the UHTA. The term Canadian-controlled private corporation is defined in subsection 125(7) of the Income Tax Act. The UHTA and the Income Tax Act are independent statutes. The fact that a person is a Canadian-controlled private corporation for Canadian income tax purposes does not necessarily mean that the person is a specified Canadian corporation for UHT purposes.

Questions about specified Canadian trusts

4.2. The definition of specified Canadian trust in section 2 of the UHTA refers to a trust under which each beneficiary having a beneficial interest in the residential property is, on December 31 of the calendar year, an excluded owner or a specified Canadian corporation. Does the reference to beneficiary include contingent beneficiaries of a trust?

No.

The term beneficiary is not defined in the UHTA. Generally, a beneficiary is a person for whose benefit the trust is created.

The term contingent beneficiary is not defined in the UHTA. Generally, a contingent beneficiary is a person who may or will benefit if a primary beneficiary dies or otherwise loses rights as beneficiary.

The term beneficial interest is not defined in the UHTA. Generally, beneficial interest refers to an interest of the beneficiary in right to income or principal of trust funds, in contrast to a trustee who holds legal title.

Generally, a contingent beneficiary does not have a beneficial interest in a residential property for UHT purposes and, therefore, is not considered to be a beneficiary for UHT purposes.

4.3. The definition of specified Canadian trust in section 2 of the UHTA refers to a trust under which each beneficiary having a beneficial interest in the residential property is, on December 31 of the calendar year, an excluded owner or a specified Canadian corporation. Can the reference to beneficiary include another trust?

Although a trust may be deemed to be a person for purposes of certain taxation statutes, a trust is not a person for UHT purposes, nor is a trust generally a person at law.

A trust arrangement is usually governed by a written document. If a written document for a particular trust arrangement identifies another trust arrangement as a beneficiary, it is likely that the beneficiaries of the other trust arrangement are intended to be beneficiaries of the particular trust arrangement.

4.4. On December 31 of a calendar year, an individual who is a citizen of Canada is the only person identified in a provincial land registration system as an owner of a property (for example, a detached house) located in Canada. The individual is a legal (titled) owner of the residential property solely in their capacity as a trustee of a trust. However, the individual is also a beneficiary of the trust and, therefore, also has beneficial ownership of the residential property. All other beneficiaries of the trust are citizens of Canada. Does the individual’s legal (titled) ownership of the residential property qualify for the exemption for a trustee of a specified Canadian trust?

Yes. The individual’s legal (titled) ownership of the residential property qualifies for the exemption for a trustee of a specified Canadian trust.

Questions that relate to Underused Housing Tax Notice UHTN5, Exemption for Vacation Properties

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN5, Exemption for Vacation Properties.

5.1. On December 31 of a calendar year, an individual who is not a citizen or permanent resident of Canada is the only person identified in a provincial land registration system as an owner of a property (for example, a detached house) located in Canada. The individual is an owner of the residential property in their capacity as a trustee of a trust. Does the individual’s ownership of the residential property qualify for the vacation property exemption?

No. Only individuals who own residential properties in their own right (and not in their capacity as a partner of a partnership, or in their capacity as a trustee of trust) are eligible for the vacation property exemption.

5.2. On December 31 of a calendar year, a corporation is the only person identified in a provincial land registration system as an owner of a property (for example, a detached house) located in Canada. The corporation is an owner of the residential property in its capacity as trustee of a bare trust. Does the corporation’s ownership of the residential property qualify for the vacation property exemption?

No. Only individuals who own residential properties in their own right (and not in their capacity as a partner of a partnership, or in their capacity as a trustee of trust) are eligible for the vacation property exemption.

5.3. On December 31 of a calendar year, an individual who is not a citizen or permanent resident of Canada is the only person identified in a provincial land registration system as an owner of a property (for example, a residential condominium unit) located in Canada. The residential property is located in an eligible area of Canada for purposes of the vacation property exemption and the individual does not own the residential property as a partner of a partnership or as a trustee of trust. What types of records should the individual keep to prove that they used the residential property as a place of residence or lodging for at least 28 days in the calendar year?

Every person that is required to file a UHT return must keep all records that are necessary to enable the determination of the person’s liabilities and obligations under the UHTA and whether the person has complied with the UHTA.

The CRA is unable to provide a prescriptive list of records that the individual must keep as each property owner’s situation is unique. However, as an example, records could include (but are not limited to) a diary of the days they used the residential property, including the names of any persons who can confirm that the individual occupied the residential property on those days. The individual might also want to consider keeping any invoices, receipts or statements for the purchase of goods and services that support or provide evidence of their occupation of the residential property for the 28 days in question.

Questions that relate to Underused Housing Tax Notice UHTN9, Exemptions for Residential Properties That Cannot be Used Year-round

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN9, Exemptions for Residential Properties That Cannot be Used Year-round.

Questions about residential properties unsuitable as a place of residence

9.1. The UHTA provides an exemption for a residential property that is not suitable for year-round use as a place of residence. What does this mean?

The term not suitable is not defined in the UHTA. The CRA interprets that term to mean not fit, adapted or appropriate for (or compatible with) the particular use as a place of residence year-round.

9.2. What did the CRA mean when it talked about a house being constructed for occupancy during the spring, summer and fall?

Example 1 in Underused Housing Tax Notice UHTN9 refers to a house that was constructed for occupancy during the spring, summer and fall. This was intended to refer to a residential property that was not constructed for use during the winter and, therefore, is not winterized. Generally, winterized means that a residential property has been prepared to be functional in, or to withstand, weather during Canadian winters.

For UHT purposes, the CRA considers a residential property not to be winterized where any of the following conditions are met:

The CRA considers a residential property that is not winterized to be a residential property that is not suitable for year-round use as a place of residence.

Questions about seasonally inaccessible residential properties

9.3. Paragraph 6(7)(d) of the UHTA provides an exemption for a residential property that is seasonally inaccessible because public access is not maintained year-round. What does this mean?

The term seasonally inaccessible is not defined in the UHTA. The CRA interprets that term to mean not capable of being reached during a particular time (season) of the year.

The term public access is not defined in the UHTA. The CRA interprets that term to mean the way or means of approach to the residential property, such as a road, is maintained at public expense and under public control.

9.4. A residential property is located on a small island in Canada. The only way to access the residential property is by private boat. Does the residential property qualify for the exemption for residential properties that are seasonally inaccessible because public access is not maintained year-round?

No. The exemption is only for residential properties that are seasonally inaccessible because public access is not maintained year-round. However, given the remoteness of the property, it may be in an area eligible for purposes of the vacation property exemption.

9.5. A residential property is located in a remote area of Canada. The only way to access the residential property is by private floatplane. Does the residential property qualify for the exemption for residential properties that are seasonally inaccessible because public access is not maintained year-round?

No. The exemption is only for residential properties that are seasonally inaccessible because public access is not maintained year-round. However, given the remoteness of the property, it may be in an area eligible for purposes of the vacation property exemption.

9.6. A residential property is located on a road that is not maintained at the public expense and under public control. The road is closed during the winter and there is no other way to access the residential property. Does the residential property qualify for the exemption for residential properties that are seasonally inaccessible because public access is not maintained year-round?

No. The exemption is only for residential properties that are seasonally inaccessible because public access is not maintained year-round.

Questions that relate to Underused Housing Tax Notice UHTN12, Exemptions for Deceased Individuals and Their Personal Representatives or Co-owners

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN12, Exemptions for Deceased Individuals and Their Personal Representatives or Co-owners.

12.1. If a deceased individual was an excluded owner of a residential property immediately before their death, does their status as an excluded owner continue after their death? Put differently, does the deceased individual remain an excluded owner of a residential property while they remain a legal (titled) owner of the residential property?

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.

Questions that relate to Underused Housing Tax Notice UHTN13, Exemptions for New Residential Properties

The questions and answers in this section relate to content found in Underused Housing Tax Notice UHTN13, Exemptions for New Residential Properties.

13.1. The term substantially completed is used in the exemptions in paragraphs 6(7)(k) and (l) of the UHTA. How does the CRA interpret the term substantially completed in these paragraphs?

The term substantially completed is not defined in the UHTA. For UHT purposes, the CRA interprets the term substantially completed to mean the construction of a residential property is generally 90% or more completed so that an individual could reasonably inhabit the property. A residential property may be considered to be substantially completed even if there are outstanding minor repairs, adjustments or upgrades since this does not reasonably impair the use and enjoyment of the property as a place of residence. Whether the construction of a residential property is substantially completed on a particular day is a question of fact, and an owner of a residential property (such as a builder of a residential property) must make that determination on a case-by-case basis.

13.2. Paragraph 6(7)(k) of the UHTA provides an exemption for a residential property whose construction is not substantially completed before April of the calendar year. If construction of a residential property is not substantially completed on December 31 of the calendar year, does the residential property qualify for this exemption?

No. The exemptions in paragraphs 6(7)(k) and (l) of the UHTA apply only to residential properties where both of the following conditions are met:

An owner of a property does not have an obligation to file a return for a property for a calendar year if the construction of the property is not substantially completed on December 31 of the calendar year.

Further information

For all technical publications related to the UHTA, go to Underused housing tax technical information.

For general enquiries about the underused housing tax, call the applicable telephone number:

  • if you are calling about a residential property that is owned by an individual and you are calling from:
    • within Canada or the United States, call 1‑800‑959‑8281
    • outside Canada and the United States, call 613‑940‑8495 (collect calls accepted)
  • if you are calling about a residential property that is owned by a corporation and you are calling from:
    • within Canada or the United States, call 1‑800‑959‑5525
    • outside Canada and the United States, call 613‑940‑8497 (collect calls accepted)

To request a ruling or an interpretation related to the application of the underused housing tax, write to:

GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville Tower A 5th floor
320 Queen St
Ottawa ON  K1A 0L5
Canada

Fax: 1‑418‑566‑0319

Refer to GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service , which explains the rulings and interpretations service offered by the Canada Revenue Agency.

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