{"id":1714,"date":"2017-01-18T22:17:51","date_gmt":"2017-01-18T22:17:51","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=1714"},"modified":"2017-01-18T22:17:51","modified_gmt":"2017-01-18T22:17:51","slug":"will-bcs-foreign-buyers-tax-administrators-please-speak-up","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2017\/01\/will-bcs-foreign-buyers-tax-administrators-please-speak-up\/","title":{"rendered":"Will BC’s Foreign Buyers\u2019 Tax Administrators Please Speak Up?"},"content":{"rendered":"

The BC government recently congratulated itself<\/a> on the apparent effects of its controversial decision over the summer to impose an additional 15% property transfer tax on purchases of real estate in Metro Vancouver by foreign buyers.\u00a0 Since then, the previously galloping increases in local housing prices have slowed, or perhaps even reversed slightly.\u00a0 Foreign buyers, whose presence in the purchasing pool has reportedly diminished, nonetheless paid over $10.1 million of the additional tax during the first three months of the tax alone.<\/p>\n

The political discussion surrounding the tax has assumed that the affected purchasers are mainly wealthy individuals from overseas who are intent on snapping up Vancouver real estate in neighborhoods that are now too expensive for local income-earners to live in.\u00a0 However, real estate lawyers and other professionals have generally been confronted with more complicated circumstances that are potentially subject to the tax, which have largely been left out of the public discourse.<\/p>\n

This is particularly concerning when one considers the amounts at stake.\u00a0 For example, the average sale price of a Vancouver house is over $1.5 million, which would mean additional tax of $225,000 on a single purchase. \u00a0With these kinds of numbers in play, one would expect not only complex legislative changes to underlie the tax, but also appropriately sophisticated government publications that explain the government\u2019s views on common interpretative issues expected to arise in the course of the administration of the tax.<\/p>\n

The related amendments to BC\u2019s Property Transfer Tax Act<\/em> (the \u201cPTTA<\/em>\u201d) are indeed complex.\u00a0 But the implementation of these amendments was coupled with the publication by the government of Information Sheet 2016-006: Additional Property Transfer Tax on Residential Property Transfers to Foreign Entities in the Greater Vancouver Regional District<\/em> (July 27, 2016)<\/a>.\u00a0 Nothing has been published more recently. \u00a0The four-page Information Sheet provides a surprisingly narrow discussion on the legal components of the tax, without any meaningful indication of the government\u2019s positions on the many interpretative questions that arise from the amended text of the PTTA<\/em>.<\/p>\n

One critical interpretive question involves limited partnerships \u2013 more specifically, the role of the general partner.\u00a0 For example, there is no exemption from the tax for purchases of residential property for redevelopment and sale. This type of purchase is very common in Vancouver\u2019s development-heavy market. \u00a0It is also common for multiple adjoining parcels to be sold together for a hefty price, so if the additional tax were to apply, the potential liability would be considerable.\u00a0 These transactions frequently involve the use of a limited partnership on the purchaser\u2019s side.\u00a0 Often some of the funding comes from a foreign investor, who has an interest in the partnership as a limited partner.\u00a0 The remaining partners, including the general partner, are local. \u00a0The general partner conducts the purchase on behalf of the partnership.<\/p>\n

In this scenario, the amended text of the PTTA <\/em>is arguably vague about whether the additional tax would apply.\u00a0 In one interpretation, the general partner can essentially be considered a bare trustee in relation to the partnership property (i.e. the Vancouver real estate), in which case the tax would generally apply because of the foreign investor\u2019s beneficial interest in the partnership property.\u00a0 Alternatively, it is possible that the purchase is being made on the general partner\u2019s own account (i.e. the limited partners do not acquire interests in the property itself, but instead only have personal claims against the general partner, who is the sole beneficial owner of the real estate).\u00a0 In the latter case, the tax would generally not apply because the limited partners would not impact the application of the tax.<\/p>\n

Unfortunately, the Information Sheet provides no indication whatsoever about how the government intends to administer the tax with respect to purchases by limited partnerships, despite their prevalence in the Vancouver market.<\/p>\n

Furthermore, some of the more difficult concepts related to the tax are discussed with inadequate care in the Information Sheet.\u00a0 For instance, the Information Sheet describes the concept of a taxable trustee <\/em>as follows: \u201cTaxable trustees are trustees that are<\/u> a foreign national or foreign corporation, or a beneficiary of a trust that is a foreign national or foreign corporation<\/u>\u201d (emphasis added). \u00a0Words are clearly missing for the second part of that sentence.\u00a0 It states incorrectly that a beneficiary might be a taxable trustee<\/em>. \u00a0This mistake highlights the overall weakness of the document.<\/p>\n

The government has made a serious change in tax policy, yielding millions of dollars in new tax revenue each month.\u00a0 While the policy benefits of the additional tax are debatable, there is a clear deficiency in the government\u2019s publications related to the tax.\u00a0 More is required than simply serving as a tax collector.\u00a0 The government should promptly revise and expand on the Information Sheet to more comprehensively communicate its views on how the tax applies in a practical manner to those who will potentially be subject to the tax.<\/p>\n","protected":false},"excerpt":{"rendered":"

The BC government recently congratulated itself<\/a> on the apparent effects of its controversial decision over the summer to impose an additional 15% property transfer tax on purchases of real estate in Metro Vancouver by foreign buyers.\u00a0 Since then, the…<\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21,25],"tags":[],"class_list":["post-1714","post","type-post","status-publish","format-standard","hentry","category-provincial-tax","category-taxation-of-real-estate"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1714","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=1714"}],"version-history":[{"count":0,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1714\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=1714"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=1714"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=1714"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}