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Tax Minute – British Columbia’s LOTA
In December, we looked at the new Federal trust filing and disclosure requirements that are being rolled out this year. In a similar vein, some provinces are seeking to implement additional disclosure requirements with a view to increasing taxpayer transparency. This month, we will be taking a look at British Columbia’s newly enacted Land Owner Transparency Act (“LOTA”).
Overview
BC’s LOTA came into force on November 30, 2020. The LOTA requires a transferee to file a Transparency Declaration when registering an interest in land and, where the transferee is a “Reporting Body” (being a corporation, trust, or partnership, subject to some limited exceptions), the transferee must also file a Transparency Report. A Reporting Body with an interest in land will also need to file a Transparency Report if there is a change in the interest holders of the Reporting Body (i.e. the shareholders, beneficiaries, or partners), and, even if the property is not transferred and there are no changes in the Reporting Body’s interest holders, will need to file a Transparency Report by November 30, 2021 unless the Reporting Body transfers the land prior to that date.
Transparency Report
A Transparency Report must contain information regarding the Reporting Body, each interest holder of the Reporting Body, and the settlor in the case of a trust. This information will be all be publicly accessible on a registry. The information that must be reported regarding an interest holder includes:
- primary identification information (full name, citizenship status, location of principal residence, etc.),
- last known address;
- SIN number;
- tax number (if applicable);
- residency status for tax purposes; and
- a description of how they are an interest holder and when they became an interest holder.
Penalties
Failure to abide by the requirements of the LOTA can lead to substantial penalties. The province is entitled to conduct inspections or demand information or verification to ensure that a Transparency Report is accurate and complete. Failure to comply with the province’s requests can lead to the issuance of an administrative penalty up to the greater of $50,000 or 5% of the value of the property. This penalty can be imposed upon any director, officer, manager or agent of a corporation that authorized, permitted or participated in the contravention. Further, the penalty for failure to file a Transparency Report or providing false or misleading information is a fine which can be up to $50,000 and 15% of the value of the property.
How the LOTA will impact our clients
As of now, the LOTA is simply a compliance matter that should not be ignored by those who own property in BC. In conducting future audits and reviews, the CRA will surely make full use of the additional information available to it as a result of the LOTA. Further, with this information now available to it, we expect BC to reform its land transfer tax laws in order to close some of the loopholes that currently exist. With similar measures expected across the country, our clients need to be mindful of the possible tax implications of holding property in corporations, trusts and partnerships.
At Mowbrey Gil, we have an experienced tax team that can help our clients navigate these and other tax related issues. Contact us today and allow us to exceed your expectations!
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