B.C. Expands Property Transfer Tax Exemption for Residential Property Purchases

Written by Mark V. Lewis and Michelle Yung

On May 3, 2021, by Order in Council No. 277, the Government of British Columbia amended the Property Transfer Tax Regulation, B.C. Reg 74/88. This amendment relates to the application of the additional property transfer tax payable by foreign purchasers of residential property in specific areas of the province (the "Foreign Buyers Tax") and it expands an exemption introduced June 1, 2020, applicable to a limited partnership with a minority of foreign limited partners. This amendment is retroactive to June 1, 2020.

The exemption introduced last year provided that residential property that would otherwise attract the application of the Foreign Buyers Tax was exempt from the tax if the purchaser was a Canadian corporation that was a general partner of a limited partnership formed or registered under B.C.'s Partnership Act and the corporation was acquiring the residential property on behalf of the limited partnership, in respect of which:

1. the combined interest in the limited partnership of all foreign limited partners accounted for less than half of the entitlement of all partners to share in the profits of the limited partnership; and
2. each general partner and limited partner was a resident of Canada for income tax purposes throughout the taxation year in which the acquisition occurred.

However, this exemption did not apply when a nominee corporation was used to acquire title to the residential property instead of the general partner.

Through this amendment to the regulation, the government has now expanded the exemption to allow a nominee corporation to acquire residential property on behalf of a qualified Canadian-controlled limited partnership, provided certain specific conditions are satisfied.

In addition, as a result of the retroactive application of the amendment, the regulation provides that a nominee bare trustee or general partner may apply for a refund of the tax paid upon registration if it qualified for an exemption as of June 1, 2020, but failed to apply for that exemption at the time of registration. The transferee has up to six years following the date of the registration to make a refund application. If the administrator is satisfied that the transferee would have qualified for an exemption under the regulation, a refund equivalent to the amount of the exemption entitled to the transferee on the date of registration will be issued.

Bennett Jones has extensive experience in all aspects of land acquisitions and particularly in the context of residential development. If you have questions regarding how this amendment may affect your residential development or require assistance obtaining a refund from the administrator, please contact our Commercial Real Estate group.