A new regime affecting B.C. land owners may soon be in effect.
Under the province's proposed new real estate rules, entities that own land in British Columbia will soon have to disclose information about individuals who own and control land. British Columbia's new NDP government has released a new white paper that includes draft legislation to enhance tax administration and information sharing as part of the new B.C. real estate speculation tax changes it announced in its February 20, 2018 provincial budget. The white paper, which sets out a framework for the Land Owner Transparency Act, requires certain corporations, trustees and partners to report information about these individuals, some of which British Columbia intends to make available via a publicly accessible database. The province is accepting comments on its white paper until August 19, 2018.
For a handy summary of the highlights of B.C.'s new speculation tax on residential property, see the "Background" section at the end of this article.
Who has to report?
According to the white paper, British Columbia's proposed new rules require corporations, trustees and partners (i.e., "reporting bodies") to identify individuals who have a beneficial interest in land, who have a significant interest in the landowning corporation or who have an interest in land through a partnership. This disclosure requirement applies to all land in the province, unless that land is specifically excluded.
As a result, all reporting bodies that hold an interest in land for a beneficial owner will be required to file a disclosure report during an initial transition period. On an ongoing basis, reporting bodies will also have to file a disclosure report:
The white paper advises that the proposed legislation seeks to preserve and maintain the integrity of the land title system by clarifying that persons dealing with legal interests in land are not affected by transparency declarations and disclosure reports filed under the legislation, and that these documents are not records filed under the Land Title Act.
Information to report
The information that must be reported depends on whether the reporting body is a corporation, a trustee or a partnership.
Under the proposed rules, a corporation must disclose:
Where the legal owner of the land is a trustee, the trust must disclose:
A partnership must disclose:
Where a reporting body is unable to determine or confirm the identity of the individuals who ultimately own or control the corporation, that body is required to outline the steps it took to identify the appropriate individuals, and provide the reasons the identity could not be confirmed.
Penalties for not reporting
Under the draft legislation, British Columbia would be allowed to refuse land title registrations that are not accompanied by a completed transparency declaration and, if applicable, a completed disclosure report. In addition, administrative penalties up to $50,000 for designated contraventions of the Act and criminal penalties up to $100,000 may apply.
British Columbia notes that basic identification information will be made available in a publicly accessible database of beneficial ownership. To address privacy concerns, the province says it will not make available more sensitive information, such as social insurance numbers and dates of birth, which will only be available to authorized entities such as law enforcement agencies and tax authorities. In addition, British Columbia says that the database will not include information on certain underage and vulnerable individuals. There will be a mandatory 30-day waiting period before making information in the disclosed report publicly available.
British Columbia says it will accept comments on the draft legislation in its white paper that it receives by August 19, 2018. Specifically, the province asks stakeholders to consider:
Background — B.C. land speculation tax
The new NDP government introduced a new speculation tax on residential property in British Columbia intended to target foreign and domestic home owners who do not pay income tax in British Columbia, in its 2018 provincial budget. The budget announced that the speculation tax would apply at a rate of 0.5% of assessed value, starting in 2018 and will increase to 2% of assessed value in 2019 for properties in certain areas. The budget also introduced a non-refundable income tax credit to offset the new property tax to provide relief to persons who may not otherwise qualify for an up-front exemption, but otherwise pay income taxes in British Columbia. This non-refundable income tax credit can be carried forward to future taxation years.
British Columbia also proposed to increase the provincial property transfer taxes to 5% (from 3%) on purchases of residential property values above $3 million and to increase foreign buyer's tax on purchases of residential properties to 20% (from 15%), and expanded the tax beyond the current Greater Vancouver Regional District.
The budget also proposed to enhance tax administration and information sharing, including measures to:
In March 2018, British Columbia stated that the speculation tax rate will remain at 0.5% of the property's value for the 2018 taxation year and, starting in 2019, will increase only for foreign investors and satellite families (to 2%) and for Canadian citizens and permanent residents who do not live in British Columbia (to 1%). British Columbia further said that the tax would no longer apply to properties in the Gulf Islands, Parksville, Qualicum Beach or rural Fraser Valley. Further, British Columbia indicated that some properties will be exempt from the proposed tax, including British Columbian's primary residences and qualifying long-term rentals, among others.
For more information, contact your KPMG adviser.
Information is current to July 10, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.
© 2018 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.