New Property Transfer Tax Form
On September 17, 2018, a new version of the property transfer tax return came into effect. The new Form 31 was created to give effect to the June 12, 2018 Information Collection Regulation (the “Regulation”) of the Property Transfer Tax Act ordered by the Ministry of Finance, also with effect from September 17.
Under the Regulation, the information required to be disclosed by corporate purchasers and trusts is substantially increased.
Corporations must provide detailed personal information, including country of citizenship, of each “corporate interest holder”, as defined in the Regulation. A corporate interest holder is an individual who:
- has legal or beneficial ownership or control of shares of the purchaser corporation representing 25% or more of the voting rights or equity of the corporation,
- has the right, directly or indirectly to appoint the majority of the board of directors, or
- has the right to exercise significant control of the corporation under a unanimous shareholders’ agreement.
Importantly, in ascertaining whether an individual is a corporate interest holder, the Regulation requires one look to whether that individual’s interest, power or right can be exercised directly or indirectly together with one or more persons with common interests or through other corporations, trusts, agents or other intermediaries. This requires, in effect, “looking through” those various intermediaries to the individuals who exercise effective control of the kind contemplated above. Because of the broad language in the Regulation, this could be difficult to accomplish in every case, especially with complex corporate structures.
Pursuant to the Regulation, trusts must provide detailed personal information, including country of citizenship, of each beneficiary of the trust. If the beneficiary is a corporation, the personal information of each director of the corporation and each corporate interest holder must also be disclosed. If the trust is a “bare trust”, the “settlor” of the trust must also be disclosed. This is the individual or corporation who contributed the property to the trust or contributed the assets used to acquire the property. We currently do not have clarity with respect to discretionary beneficiaries and how they must be treated under the new rules. Presumably, their information must also be disclosed.
The new property transfer tax return will increase the complexity of filing such returns. Corporate and trust property purchasers should be prepared to disclose significantly more information than previously. Much of the information may be difficult to gather and so attention should be paid to these new requirements early in the course of the property sale.