ADDITIONAL PROPERTY TRANSFER TAX FOR FOREIGN ENTITIES AND TAXABLE TRUSTEES

ADDITIONAL PROPERTY TRANSFER TAX FOR FOREIGN ENTITIES AND TAXABLE TRUSTEES

by Alina K. Nikolaeva

In addition to the property transfer tax, if you’re a:

• foreign national – A person who is not a Canadian citizen or permanent resident of Canada, including a stateless person;
• foreign corporation – A foreign corporation is a corporation that is one of the following:
  • Not incorporated in Canada, or
  • Is incorporated in Canada but is controlled directly or indirectly by one or more foreign entities unless the shares of the corporation are listed on a Canadian stock exchange;
• taxable trustee – Further to the definition in the Property Transfer Tax Act [s.2.01], a taxable trustee is:
  • a foreign national or foreign corporation holding title in trust for beneficiaries, or
  • a Canadian citizen or permanent resident, if a beneficiary of the trust is a foreign national or foreign corporation and that beneficiary holds a beneficial interest in residential property held by the trust immediately after registration of the transfer with the Land Title Office;

you must pay the additional property transfer tax on your proportionate share of a residential property’s fair market value if the property is within specified areas of B.C.

Your proportionate share is the percentage of interest that you’re registering on title with the Land Title Office. For example, if you’re a foreign entity (foreign national or foreign corporation) acquiring a 70% interest in a property, you pay the additional property transfer tax on 70% of the residential property’s fair market value.

Tax amount and specified B.C. areas

 If the property transfer is within the following areas, the tax rate is 20% on the fair market value of your proportionate share:

• Capital Regional District
• Fraser Valley Regional District
• Metro Vancouver Regional District
• Regional District of Central Okanagan
• Regional District of Nanaimo

The additional property transfer tax doesn’t apply to properties located on Tsawwassen First Nation treaty lands.

 Tax on residential portion of property

 The additional property transfer tax applies on only the fair market value of the residential portion of a property located in the specified areas of B.C. There are three types of properties where this may occur:

• Property entirely classified as residential (class 1) by BC Assessment. You pay the additional tax based on the fair market value of the entire property;
• Property classified as farm land by BC Assessment because it’s used for an owner’s dwelling or a farmer’s dwelling. You pay the additional tax on the value of the residential improvement plus 0.5 hectares of land;
• Mixed class property that includes a residential property, such as a residential condo in a building (class 1) with commercial space (class 6). You pay the additional tax on the fair market value of the residential property (land and improvement) only.

Exemptions

In some circumstances, you may be exempt from the additional property transfer tax if you’re:

• Exempt from property transfer tax;
• A confirmed B.C. Provincial Nominee;
• Acquiring a property on behalf of a Canadian-controlled limited partnership.

Some transfers will still be subject to the additional property transfer tax even when exempt of the property transfer tax. These include:

• A transfer resulting from an amalgamation made under the Business Corporations Act, the Canada Business Corporations Act (Canada) or a similar provision of Canada or a province;
• A transfer to a surviving joint tenant as a result of the death of a joint tenant;
• A transfer to change the registered trustee(s) for reasons that do not directly or indirectly relate to a change in beneficiaries, class of beneficiaries or trust terms.

The additional property transfer tax doesn’t apply to registration of trusts that are mutual fund trusts, real estate investment trusts or specified investment flow-through trusts.

 B.C. Provincial Nominees

If you’re a foreign national individual who receives confirmation under the B.C. Provincial Nominee Program, you do not pay the additional property transfer tax if you claim the exemption.  To qualify for this exemption:

• You must be a confirmed B.C. Provincial Nominee when the property transfer is registered with the Land Title Office;
• The property must be used as your principal residence;
• The property transfer must be made to an individual.

The B.C. Provincial Nominee is the individual named on a valid nomination certificate issued by the province. Family members, including a spouse or common law partner, are not exempt from the additional property transfer tax and must pay the tax on their proportionate share of the property if they’re also a foreign national.

Having a valid work permit, student visa, or being a candidate in the entrepreneurial immigration stream to permanent residency may not necessarily mean you’re a B.C. Provincial Nominee.  If your Confirmation of Nomination has expired, you must provide proof that you applied for permanent residency before the expiration date to be considered for the exemption.  You may claim this exemption only once.  If you purchase another property, you must pay the additional property transfer tax. Qualifications for every exemption claimed are reviewed.

To claim the exemption, your legal professional must attach a copy of your B.C. Provincial Nominee confirmation letter together with the property transfer tax return.

Canadian-controlled limited partnerships

If you’re acquiring a property on behalf of a qualifying Canadian-controlled limited partnership, you may be exempt from paying additional property transfer tax if you’re one of the following:

• A general partner in a limited partnership;
• A corporation, other than a foreign corporation, and a bare trustee of a trust where the beneficiaries include one or more general partners or limited partners in a limited partnership.

Note: For the purpose of this exemption, “general partner” and “limited partner” have the same meaning as section 51 or section 80 of the Partnership Act.  To qualify for this exemption, the property (land and improvements) transfer must be registered at the Land Title Office on or after June 1, 2020 and:

• Each general partner must be a Canadian citizen, a permanent resident of Canada or a corporation that’s not a foreign corporation;
• Each general partner and each limited partner must be a resident of Canada for income tax purposes throughout the taxation year in which the transfer occurs;
• The combined interest of all foreign limited partners in the limited partnership must account for less than half of the entitlement of all partners to share in the profits of the limited partnership;
• The transferee’s interest in that residential property is a limited partnership property;
• In respect of the transferee’s interest, no person has a beneficial interest in that residential property other than as a general partner or limited partner in that limited partnership.

You may claim this exemption through the web-based property transfer tax return.