Good News on Land Transfer Tax in Manitoba and Ontario
Adam Aptowitzer, April 04, 2010
Homeowners in most provinces know that the land transfer tax due on purchase of the home can be the straw that breaks the camel’s back as far as affordability goes. Most provinces have a version of the land transfer tax (as called in Ontario, or the Property Transfer Tax or Land Purchase Tax in other provinces). The tax is generally calculated as a percentage of the property being transferred, so the higher the value of the property the greater the tax.
In most provinces the transfer of property between related organizations does not necessarily result in an abatement of the tax (unless beneficial ownership of the property does not change). This has apparently been a problem in two areas for charities. Perhaps the most common involves charities trying to set up foundations to hold their real estate can be stymied by the costs of the Land Transfer Tax. (Generally the reason for such a transfer is an attempt to creditor proof the organization from potential claims). The second situation involves the transfer of property from an unincorporated charity to a corporation once the group decides to operate as such (depending on the circumstances).
Fortunately, the latest Ontario and Manitoba budgets both proposed to exempt transfers of real estate between related organizations. In Ontario transfers of land from trustees to a non-share capital corporation, or from one non-share capital corporation to another, would be exempt if:
. the non-share capital corporation will be continuing the same charitable purpose for the same members; and
. no consideration is paid, other than the assumption of any existing liabilities registered on the land.
This is good news for organizations considering the use of separate corporate vehicles for creditor proofing purposes. With luck the other provinces which levy a similar tax will follow suit.