Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land May 2017

A similar situation results without the assistance of subsection 3(12) in the case of corporations which amalgamate through statutory amalgamation. In the ministry's view, for land transfer tax purposes, the amalgamated corporation is a continuation of the corporations which have been amalgamated. As a result, the corporations which have been amalgamated, if they were affiliates immediately before and at the time of amalgamation, will always be affiliates following the amalgamation.

A and B execute an agreement in which A agrees to sell and B agrees to buy an interest in land. Completion is scheduled for 60 days following the execution of the agreement. The consideration is the assumption of an existing mortgage and payment of cash. Fifteen days following the execution of the agreement B assigns his/her rights in the agreement to C in return for cash, and C assumes B's position under the agreement. On the scheduled closing date A, on direction, provides a deed of the land to C, who pays the required cash to A and assumes the liabilities. C does not register the deed. ...

C will obtain a beneficial interest in the land by virtue of the assignment of B's interest. At that point, C will...be sheltered by the provisions in subclauses (i) and (ii) in that the cash called for on closing in the agreement will not have been paid, and the assumption of the existing mortgage will not have taken place.

However, when C pays over the cash and assumes the liability as set out in the agreement, the sheltering provided by subclauses (i) and (ii) will cease. At such time, C will be taxable under section 3 of the Act, as the beneficial interest which C has received will then fall within the terms of a disposition of a beneficial interest in land.

Clause (c) involves cases in which the beneficial interest in the land leaves the corporate circle of affiliated corporations and is acquired by a non-related third party. Provided the tax payable is paid on the acquisition by that third party, the corporation or corporations which had received a deferral may have their undertakings shortened and their deferred tax cancelled.

All tax deferred is required to be secured notwithstanding that there may be several successive deferrals within the same corporate circle.

In the event the undertaking required under subsection 3(9) is partially satisfied, for example, by a tax-paid sale of part of the land to a person who is not an affiliate of the corporation, the Minister will consider reduced security.

S. 3 tax not triggered until consideration paid

Completion of a transaction occurs when the value of the consideration called for in the agreement is satisfied. Clause 3 (1)(g) reflects this indicator of completion of an agreement, and in effect suspends section 3 tax being levied on a purchaser or assignee until such time, if ever, as the conditions at 3(1)(g)(i) and (ii) cease to exist. …

For example, A and B execute an agreement in which A agrees to sell and B agrees to buy an interest in land. … The consideration is the assumption of an existing mortgage and payment of cash. Fifteen days following the execution of the agreement B assigns his/her rights in the agreement to C in return for cash… .

B would not be subject to tax under section 3 of the Act. This is due to the fact that the provisions in subclauses 3(1)(g)(i) and (ii), respectively, being the value of the consideration specified in the agreement has not been paid to or for the benefit of the transferor and the liability for the value of the consideration specified in the agreement has not been assumed by or on behalf of the transferee have not been fulfilled.

...Back to Back agreements of purchase and sale

In some instances A will enter into an agreement of purchase and sale of land with B. ... B then enters into an agreement of purchase and sale for the same land with C. The completion date of this agreement is the same as the completion date in the agreement between A and B. ...

Administrative concession

...[A]s an administrative matter, the ministry has stated that, provided the two agreements are completed at the same time or within moments of one another, it will not raise an assessment against B for the tax incurred under section 3 of the Act.

Option in lease

Although leases with a term of less than 50 years are not subject to tax, the granting of an option, contained in such a lease, triggers the tax. The tax under section 3 is payable on the granting of an option, when no registration occurs, even if that option is contained in a lease than cannot exceed 50 years.

Registration within 30 days generally voids s. 3 tax

The Act provides at clause 3(5)(a) that, if there is a disposition of a beneficial interest in land, an instrument evidencing the disposition of the beneficial interest in land is registered within 30 days after the date of the disposition and tax payable under section 2 has been paid, no tax is payable under section 3 of the Act.

The result is that in the majority of cases where registration follows the closing of a transaction and tax is paid at the Land Registry Office, the person acquiring the interest need not be concerned with section 3 of the Act.