The Fighting Against Forced Labour and Child Labour in Supply Chains Act – What You Need to Know
Insights
Two private member’s bills were recently introduced in the B.C. Legislature that, if passed into law, will have an effect on the real property tax regime in British Columbia.
Contract Assignments and Beneficial Ownership Transfers Would Be Subject To Property Transfer Tax
One of the bills, entitled the Property Transfer Tax Fairness Act, 2016, would require the payment of Property Transfer Tax on transfers currently not taxed under the existing law.
The Explanatory Note to the Property Transfer Tax Fairness Act, 2016 says that the bill aims to close “two unfair loopholes in the Property Transfer Tax Act” by taxing both the assignment of a sale contract for a property prior to the sale closing (referred to recently in the news as “Shadow Flipping”) and also the transfer of a beneficial interest in a property (where the registered and legal owner of a property remains the same but agrees to hold the beneficial interest in the property in trust for another). Neither of these transfers is currently subject to Property Transfer Tax.
Transfers of a beneficial interest in a property as a result of the death of the owner of the interest, for the purpose of giving security to a creditor, or by virtue of a lease that (including renewals and extensions in the lease) does not exceed 50 years would all be exempt from Property Transfer Tax.
If this bill becomes law the opposition believes it will have a chilling effect on those involved in the process of Shadow Flipping, although it remains questionable how difficult monitoring tax evasion would be. The changes would also have a major impact on those individuals and businesses who seek to limit their tax burden by transferring beneficial ownership of their property rather than registering a transfer of title in the Land Title Office. Currently, many transactions involving large commercial properties are structured as beneficial ownership transfers to avoid triggering a tax bill.
Proposed Creation of a Vacancy Tax
The second private member’s bill, called the Speculator Tracking and Housing Affordability Fund Act, 2016, aims to address housing affordability in Metro Vancouver by creating a fund to pay for affordability initiatives in the area which would be paid for by absentee property owners who purchase property and leave it vacant.
The bill, if passed into law, would impose an annual levy on owners of strata and real property in Metro Vancouver at 2% of the fair market value of their property, but would not apply to anyone who:
• pays income tax in excess of the amount of the levy
• rents a property to an arm’s length party and declares rental income in excess of the amount of the levy
• has lived in a property as a primary residence for 5 years or more, or
• is over 55 years old and in the process of downsizing
Partial exemptions would exist where a property owner’s income tax paid or rental income declared is less than the amount of the levy.
The bill initially applies only to properties in Metro Vancouver but includes a provision allowing local governments to request the levy apply in their jurisdictions to fund housing affordability initiatives in those jurisdictions.
Both of these bills were introduced by John Horgan, the leader of the opposition B.C. NDP. The bills will likely be the subject of debate in the B.C. Legislature but it is unlikely either will pass into law. It remains to be seen whether these bills will spur public debate or cause the Government to pass legislation addressing the issues raised by the bills.
These bills come in the wake of changes to the Property Transfer Tax introduced by the B.C. Government in its 2016 budget. You can read more about the changes in EKB’s article on the recent amendments to the legislation.
EKB’s Commercial Real Estate team is experienced and knowledgeable in this area and will monitor the progress of these bills in order to keep you informed.
