In our previous post of February 29 (co-authored by Conrad Rego and Patrick Beechinor) we discussed the implications of the increase in B.C. property transfer tax from 2% to 3% on that portion of a property's value which exceeds $2 million. We also noted that effective in the Spring, the names and addresses of all beneficiaries of bare trustees are to be disclosed by the transferee upon transfer to any bare trustee. Though no reason was given by the Province for the requirement for beneficiary disclosure, industry participants have surmised that the disclosure may be a precursor for collecting property transfer tax on beneficial transfers, which are not currently taxable transactions under the Property Transfer Tax Act (British Columbia).
On April 1, 2016, a new bill was announced in the B.C. Legislature: the "Property Transfer Tax Fairness Act". If adopted, this legislation would require property transfer tax to be paid on assignments and beneficial transfers, other than beneficial transfers that occur by reason of the death of the transferor, for the purpose only of providing security to creditors, or by virtue of leases not exceeding 50 years (including any renewals or extensions provided for in the lease or a related agreement such as an option).
The Explanatory Note to the bill states that the bill "closes two unfair loopholes in the Property Transfer Tax Act. The first clarifies the intent of the existing Property Transfer Tax that the Property Transfer Tax is required to be paid by so-called Shadow Flippers each time an agreement for sale is assigned, even if the assignment is not registered in the Land Registry. The second clarifies the effect of transferring a beneficial interest of a trust as a taxable transaction captured by the Act. The bill does not propose new taxes, but instead ensures the fair application of existing taxes to everyone, including speculators and large institutional commercial property investors who have been permitted to operate with unwritten exemptions from the tax by the Provincial Government."
The bill was introduced by Mr. John Horgan of the Opposition. This may mean that it is unlikely to pass. The stated objectives are debatable with much opinion and support on both sides. However, if it does pass, there are substantial ramifications for industry participants in terms of how they organize their business affairs. In particular the benefit of holding registered interests in land through bare trustees will be diminished.
We will follow the progress of the bill and update our readership with any new developments.
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