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Exemption from the Foreign Buyers Tax Introduced for Certain Limited Partnerships
Posted in Real Estate

On May 19, 2020, the British Columbia provincial government amended the Property Transfer Tax Regulation, B.C. Reg. 74/88, to take effect on June 1, 2020. The amendment introduces a new exemption for foreign entities and taxable trustees from the obligation to pay additional property transfer tax of 20% on acquisition of residential property within specified areas, often referred to as the foreign buyer’s tax, under the Property Transfer Tax Act. Prior to this amendment, a nominee or a partner taking transfer of residential property within a specified area in trust for a limited partnership comprised of even one limited partner that was a foreign national, foreign-incorporated corporation or foreign-controlled corporation was subject to foreign buyers tax on a taxable transaction’s fair market value.

With this amendment, if a purchaser of land in a taxable transaction is the general partner of a limited partnership, the limited partnership is exempt from the foreign buyer’s tax if the limited partnership meets all of the following criteria:

  1. on the date of transfer of the property (or other application for registration of the taxable transaction at the Land Title Office):
    1. each general partner of the limited partnership is either a Canadian citizen, permanent resident of Canada or a corporation other than a foreign corporation;
    2. the combined interest in the limited partnership of all the foreign limited partners accounts for less than half of the partners’ entitlement to share in the profits of the limited partnership; and
  2. each general and limited partner of the limited partnership is a resident of Canada for income tax purposes throughout the taxation year in which the taxable transaction occurs.

It would appear that if a mere nominee takes title to residential property within a specified area in trust for a limited partnership, the exemption does not apply. The nominee would need to be made a general partner of the limited partnership.

A foreign entity can address the requirement in (2) above by holding its limited partnership interest through a Canadian corporation.

Overall, this is a positive development for investors in real estate in B.C., and addresses an inconsistent approach in applying the foreign buyers tax when compared to companies, which already enjoyed this treatment.

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