2016 Legislative Session: 5th Session, 40th Parliament

FIRST READING

The following electronic version is for informational purposes only.

The printed version remains the official version.

MR. JOHN HORGAN

BILL M 210 – 2016

PROPERTY TRANSFER TAX FAIRNESS ACT, 2016

This 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.

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as

follows:

1 The

short title of this Act is the "Property Transfer Tax Act Amendment Act".

Section 1 (1) of the Property Transfer Tax Act, R.S.B.C. 1996, c. 378, is amended by adding the following subsections to

the definition of " taxable transaction" :

(

h) purporting to transfer or grant or assign, by any method, an agreement for sale that grants a right to require the transfer

of an estate in fee simple, or require the transfer of a strata property, before the closing date of that agreement for sale;

Section 2 is amended by:

(

a) adding the following subsections:

(1.2) if the purchaser in an agreement for sale assigns that agreement for sale to a third party, that purchaser must pay

tax to the government in accordance with

section 3 or 38, and file a return, in the prescribed manner, as if he or she had

completed the agreement for sale and made application for registration at a land title office, within 30 days of the effective

date of the assignment;

(1.3) if the assignee of an agreement for sale does not complete the agreement for sale, and instead assigns that agreement

for sale to a third party, that assignee must pay tax to the government in accordance with

section 3 or 38, and file a return

in the prescribed manner as if he or she had completed the agreement for sale and made application for registration at a land

title office, within 30 days of effective date of the assignment;

4 The

section 1 definition of "fair market value" is amended by:

(

a) adding the following subsections:

(h) (

i) in the case of an assignment described in

section 2(1.2) the fair market value is deemed to be the listed price on

the agreement for sale;

(ii) in the case of an assignment described in

section 2(1.3) the fair market value for section (1) is deemed to be the listed

price on the agreement for sale, plus the sum total of all assignment fees or additional consideration paid by the assignee;

(iii) in the case of assignment in

section 2(1.2) and 2(1.3), where the transferor is not a corporate person and is assigning

the contract of sale due to catastrophic illness diagnosed, disabling injury suffered, or loss of employment commencing after

the effective date of the agreement for sale, the transferor must still satisfy all requirements of this Act, but may apply

with any supporting documentation to the administrator to request that value of the property being assigned be deemed to be

zero for the purposes of their personal tax liability under this Act;

(

i) in the case of a conveyance of land from a trustee (whether or not the trustee is so described in the conveyance) to

a person to whom or for whose benefit any equitable or beneficial interest in the land has been transferred by a conveyance

or conveyances that have not been registered, the fair market value is as determined as if the interest is registered in respect

of the unregistered conveyances made to such person;

(

j) in the case of a conveyance of land from a trustee to another trustee (whether or not either trustee is so described

in the conveyance) where,

(

i) the person to whom or for whose benefit any equitable or beneficial interest in the land is held is not the same person

to whom or for whose benefit any equitable or beneficial interest in the land was held by the trustee making the conveyance

when that trustee first acquired legal interest in the land, and

(ii) valuable consideration has been given by the transferee of an equitable or beneficial interest for the transfer of any

equitable or beneficial interest in the land held by the trustee making the conveyance while that trustee was the holder of

the legal interest in the land,

the fair market value is the value ascertained at the time of the tender or submission for registration of the land to which

the conveyance extends.

5 The following sections are added:

Disposition of beneficial interest in land

3.2

(1) For the purposes of this section, a disposition of a beneficial interest in land includes,

(

a) a sale, transfer or assignment, however effected, of any part of a beneficial interest in land; and

(

b) any change in entitlement to or any accretion to a beneficial interest in land,

but does not include,

(

c) a transfer of a beneficial interest in land which occurs by reason of the death of the owner of the interest, if the

transfer is not required to be made under the terms of an agreement enforceable by or against the person legally or beneficially

entitled to the interest immediately following the death of the owner;

(

d) a transfer or assignment of a beneficial interest in land by a debtor to a creditor for the purpose only of providing

security for a debt or loan and a transfer or reassignment by the creditor to the debtor of the security;

(

e) a lease of land or a transfer of the interest of a lessee under a lease of land if, at the time of the disposition, the

unexpired term of the lease cannot exceed 50 years, including any renewals or extensions of the term provided for in the lease

or in a separate option to lease or other document entered into as part of the arrangement relating to the lease (whether

or not the lessee and the optionee or person named in the document are the same persons).

Tax on disposition of a beneficial interest

(2) If there is a disposition of a beneficial interest in land, tax at the rates otherwise determined under

section 3 is

payable on the thirtieth day after the date of the disposition as if the disposition were a conveyance of land tendered for

registration.

By whom payable

(3) The tax under subsection (2) is payable by every person who acquires a beneficial interest in land or whose beneficial

interest in land is increased as a result of the disposition.

Multiple interests

(4) If more than one person acquires a beneficial interest in land, or more than one person’s beneficial interest in land

is increased as a result of the disposition, each of them is liable to pay only that percentage of the tax otherwise payable

under this

section that reflects their proportional share of the acquisition of or increase in beneficial interest.

Explanatory Note

This 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.

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c) Queen’s Printer, Victoria, British Columbia, Canada