Regulation - LGIC
Regulation under the Land Transfer Tax Act
Regulation Number(s):
35/16
Instrument Type:
Regulation - LGIC
Bill or Act:
Land Transfer Tax Act
Summary of Decision:
Approved
Further Information:
Ont. Reg. 35/16
Proposal Number:
16-MOF005
Posting Date:
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.
Multi-layered structures
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.
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.
Multi-layered structures
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.
Contact Address:
Ministry of Finance
Corporate and Commodity Taxation Branch
2nd Floor, Frost Building North,
95 Grosvenor Street
Toronto, Ontario
M7A 1Z1
Corporate and Commodity Taxation Branch
2nd Floor, Frost Building North,
95 Grosvenor Street
Toronto, Ontario
M7A 1Z1
Effective Date:
February 18, 2016
Decision:
Approved