Exemptions for Specified Canadian Partnerships, Trusts and Corporations

Underused Housing Tax Notice UHTN4

March 2023

This version replaces the one dated January 2023. This notice has been updated to clarify the definition of specified Canadian corporation.

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

• Overview
• The underused housing tax
• Exemptions for specified Canadian partnerships, trusts and corporations
  • What are specified Canadian partnerships, trusts and corporations
• Keeping records

Overview

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

The underused housing tax

If you are an affected owner of a residential property on December 31 of a calendar year, you have to pay the underused housing tax for the residential property for the calendar year, unless your ownership of the residential property is exempt from the tax for the calendar year.

Where certain conditions are met, your ownership of a residential property may be exempt from the underused housing tax if the property is any of the following:

• a vacation property that is located in an eligible area of Canada
• used as a primary place of residence or for qualifying occupancy
• not suitable for year-round use
• seasonally inaccessible
• uninhabitable during the calendar year
• newly constructed

Your ownership of a residential property may also be exempt if you are any of the following:

• a partner of a specified Canadian partnership, a trustee of a specified Canadian trust, or a specified Canadian corporation
• a new owner
• a deceased individual, or their personal representative or co-owner

For more information about the above exemptions, refer to the various Underused housing tax notices.

Even if your ownership of a residential property is exempt from the underused housing tax for a calendar year, as an affected owner, you still have to file a return for the residential property using Form UHT-2900, Underused Housing Tax Return and Election Form.

For an explanation of affected owner, excluded owner, owner and residential property, and to determine whether the underused housing tax applies to you, refer to Underused Housing Tax Notice UHTN1, Introduction to the Underused Housing Tax.

Exemptions for specified Canadian partnerships, trusts and corporations

If you are an affected owner of a residential property on December 31 of a calendar year, your ownership of the residential property is exempt from the underused housing tax for the calendar year if one of the following applies:

• you are an owner of the residential property solely as either of the following:
  • a partner of a partnership that is a specified Canadian partnership for the calendar year
  • a trustee of a trust that is a specified Canadian trust for the calendar year
• you are a specified Canadian corporation for the calendar year

What are specified Canadian partnerships, trusts and corporations

A specified Canadian partnership is a partnership whose members are all, on December 31, any of the following:

• excluded owners
• individuals who are citizens or permanent residents of Canada and who would be excluded owners if they were not owners of the residential property as partners of a partnership
• specified Canadian corporations

A specified Canadian trust is a trust whose beneficiaries that have a beneficial interest in a residential property are all, on December 31, excluded owners or specified Canadian corporations.

A specified Canadian corporation is a corporation that is incorporated or continued under the laws of Canada or a province and, on December 31 of the calendar year, is neither of the two following corporations:

• a corporation in respect of which the following persons have ownership or control, directly or indirectly, of shares of the corporation representing 10% or more of the value of the equity in the corporation or carrying 10% or more of the voting rights under all or under some circumstances:
  • an individual who is neither a citizen nor a permanent resident
  •  a corporation that is incorporated or continued otherwise than under the laws of Canada or a province
  •  any combination of those individuals or corporations
• a corporation without share capital having either of the following:
  • a chairperson or other presiding officer who is neither a citizen nor a permanent resident
  • 10% or more of its directors who are neither citizens nor permanent residents

Keeping records

Every affected owner of a residential property must keep records to enable the determination of their obligations and liabilities under the UHTA. Generally, you must keep the records for six years from the end of the year to which they relate.

If you do not have adequate records to support that your ownership of a residential property is exempt from the underused housing tax for a calendar year, the Canada Revenue Agency may disallow your exemption.

Further information