Effective February 18, 2016, the Ontario Government enacted
"clarifying" amendments (the Amendments) to Ontario
Regulation 70/91 under the Land Transfer Tax Act (the Act)
to stop the perceived abuse of a de minimis partnership
exemption from land transfer tax (LTT) in respect of certain
unregistered transfers of a beneficial interest in land situated in
Ontario. The Amendments apply retroactively almost 27 years, to
dispositions of beneficial interests in land occurring on or after
July 19, 1989.
In the administration of the Act, the LTT Branch of the Ministry
of Finance (the Ministry) takes the position that a partnership is
not a legal entity. Consequently, a disposition of land to a
partnership is a disposition of land to the partners in proportion
to their partnership interest. Similarly, a disposition of an
interest in a partnership that owns land situated in Ontario is
considered to be a taxable disposition of such land under the Act,
subject to certain exceptions.
Prior to the Amendments, Regulation 70/91 provides a de
minimis exception to LTT on a disposition of a beneficial
interest in land arising as a result of a person acquiring an
interest in a partnership, if the person acquiring the interest
would not be entitled, during the fiscal year of the partnership in
which the acquisition occurred, to a percentage of the profits of
the partnership that is more than 5% of the profits to which the
person would have been entitled at the beginning of the fiscal
year. The Ministry had previously provided rulings to this
While the Amendments preserve the de minimis exemption,
the exemption will not apply if the partner who acquires the
partnership interest is a trust or another partnership. The
Ministry stated that the Amendments are targeted at complex real
estate structures involving REITs and/or layer(s) of limited
partnerships. The Ministry also stated that if a taxpayer had
previously received a written ruling from the Ministry on or before
February 12, 2016 that applies to a taxpayer-specific disposition
of a beneficial interest in land that is a partner's interest
in a partnership, generally, the ruling would continue to
As a result of the retroactivity of the Amendments, taxpayers
who had relied on the exemption may now be considered to be
non-compliant with obligations under the Act to file a return and
remit LTT when due. Any taxpayer who failed to file a return as
required would be liable for a penalty, when assessed, equal to 5%
of the tax payable on the disposition, plus interest. In addition,
any taxpayer who failed to deliver a return or who failed to remit
the tax payable under the Act is guilty of an offence and on
conviction liable to a fine of not less than 25% of the tax payable
and not more than twice the amount of tax payable. The Ministry did
not comment on the financial consequences of retroactive
Taxpayers affected by the Amendments may consider the grounds
for challenging their legality, including the apparent creation of
retroactive guilt of an offence under the Act.
The contribution of Brittany Finn, articling
student, in the preparation of this article is gratefully
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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