General Tax Alert – Legal Title Without Beneficial Ownership – Possible Underused Housing Tax Filing Requirements

A Canadian citizen whose name is on title on a residential property in Canada, but who has no beneficial interest in the property, will likely have a filing obligation for the Underused Housing Tax (UHT).  The only exception to this is for the personal representative of a deceased person (in other words, the executor of an estate). The filing deadline for the UHT is October 31, 2023, for the 2022 year.

Examples of situations that could result in the requirement to file, include the following:

• If your name is on title of a residential property of another person’s property (such as a parent or sibling) for probate purposes, there may be a UHT filing requirement.
• If your name is on title to assist your children or another person in obtaining a mortgage, there may be a UHT filing requirement.
• If your name is on title in a situation where the residential property is an asset of your corporation, or a partnership, with any income reported and taxed in that entity, then you are likely holding that property as either a trustee or a partner, in either case there may be a UHT filing requirement.
• If your name is on title of a residential property as a trustee of a family trust or any other trust arrangement, there may be a UHT filing requirement.
• Where a couple owns one or more rental properties and only one is named on title, however, the property is jointly owned, the individual on title may be considered to be holding an interest in the residential property in trust for the other owner and therefore may have a UHT filing requirement.

The above examples may also result in the requirement to file a T3 – Trust Income Tax and Information Return.  For further information on the new filing and reporting requirements for T3 Trust Income Tax and Information Returns please, see the following article on our website:

https://kmss.ca/changes-to-the-trust-reporting-rules-old-news-is-still-not-good-news/

The application of the new rules has been extended to apply to all Trust taxation years ending after December 30, 2023, resulting in a filing deadline of March 30, 2024.

Please contact your KMSS advisor if you any questions with respect to legal title versus beneficial ownership.