Regulation under the Land Transfer Tax Act
Bill or Act:
Land Transfer Tax Act
Summary of Decision:
Summary of Proposal:
Amendments have been made to section 1 of Ontario Regulation 70/91 to clarify how the "de minimis" partnership exemption (the "Exemption") from land transfer tax (LTT) under section 3 of the Act applies to certain dispositions of a beneficial interest in land, including those occurring in respect of complex real estate structures involving real estate investment trusts (REITs) and/or layer(s) of limited partnership(s).
Applicable on or after July 19, 1989 (the date on which the Exemption became effective), the amendments clarify that, for dispositions on or after July 19, 1989:
1. One of the following must be satisfied by the person (the individual or corporation) who acquires the beneficial interest in land:
a. The person was a partner in the partnership immediately before the disposition and that person's entitlement as a partner to a percentage of the profits of the partnership, assuming it had profits to distribute, increased as a result of the disposition, or
b. The person became a partner in the partnership as a result of the disposition and became entitled as a partner to a percentage of the profits of the partnership, assuming it had profits to distribute, as a result of the disposition.
2. For limited partnerships, the provisions of the Limited Partnerships Act apply to determine if the person is a partner in a limited partnership.
3. For further clarity, the amendments state that the Exemption is not available if the partner who acquires the partner's interest in the partnership is a trust (such as a REIT) or another partnership.
Other requirements of the Exemption, including those respecting the five per cent limit, continue to apply.
It is possible that a taxpayer (an individual or corporation) may acquire a beneficial interest in land through trusts or partnerships. The Exemption is not available when a REIT or another type of trust becomes a partner in a partnership that holds land. Similarly, the Exemption is not available when a partnership becomes a partner in another partnership that holds land.
Ministry of Finance
Corporate and Commodity Taxation Branch
2nd Floor, Frost Building North,
95 Grosvenor Street
February 18, 2016