BC's Land Owner Transparency Act [LOTA] was granted royal assent on May 16, 2019. LOTA is the first of its kind in Canada and will create a publicly searchable registry of information on individuals that directly or indirectly hold interests in land through corporations, trusts, and partnerships.
Implemented as part of a government initiative to end the hidden ownership of land, it is meant to address the use of these entities for money laundering, tax fraud, and tax evasion. LOTA will come into force on November 30, 2020.
This bulletin covers:
1. who will be impacted;
2. requirements for filing the new transparency declaration and reports;
3. registry administration and access; and
4. fines and enforcement measures.
Who is Impacted?
Under LOTA, everyone that acquires an interest in land, or holds directly or indirectly, an interest in land, through a corporation, partnership or trust, is impacted. An interest in land includes: an estate in fee simple, a lease with a term of more than 10 years, or a life estate in land.
LOTA particularly focuses on interest holders, which are the individuals that hold a beneficial interest in land or have specified rights in relation to land through reporting bodies. LOTA contemplates three types of interest holders: corporate interest holders, partnership interest holders, and beneficial owners. Reporting bodies are defined as relevant corporations, partners of relevant partnerships and trustees of relevant trusts.
Relevant Corporations & Corporate Interest Holders
Relevant corporations means all corporations and limited liability companies except those specifically excluded in Schedule 1 of LOTA, which include government entities, public companies, private schools, strata corporations, financial institutions, insurance companies, and trust companies.
Corporate interest holders are individuals that:
- directly or indirectly own, or indirectly control
- 10% or more of the shares of the relevant corporation, or
- shares of the relevant corporation that carry 10% or more of the voting rights at general meetings; or
- have a right or ability that if exercised, would result in the election, appointment or removal of the majority of the directors of the relevant corporation.
Partners of Relevant Partnerships & Partnership Interest Holders
Relevant partnerships are essentially all partnerships under the Partnership Act and includes similar legal relationships created in jurisdictions outside of BC.
Where an interest in land is partnership property, partnership interest holders are presumed to be individuals that are (a) partners in a relevant partnership or (b) corporate interest holders of a relevant corporation that is a partner in a relevant partnership.
Trustees of Relevant Trusts & Beneficial Owners
Relevant trusts are defined as express trusts, including bare trusts or similar legal relationships created in another jurisdiction unless excluded in Schedule 2 of LOTA. Presently excluded trusts include: charitable trusts, testamentary trusts, pension plan trusts, and mutual fund trusts.
Where land is registered in the name of a trustee of a relevant trust, beneficial owners are individuals who (a) have a beneficial interest in respect of the interest in land that is not contingent on the death of another individual; (b) have the power to revoke the relevant trust and receive the interest in land; or (c) are corporate interest holders in respect of a relevant corporation that (i) has a beneficial interest in the land, or (ii) has the power to revoke the relevant trust and receive the interest in the land.
Filing Requirements under LOTA
All persons must file a transparency declaration when registering an interest in land. The declaration must state whether the transferee is a reporting body and if so, whether the transferee is a relevant corporation, the trustee of a relevant trust, or a partner of a relevant partnership.
A transparency report is only required for reporting bodies: (a) with the application to register an interest in land or (b) when there is a change in the beneficial owner or interest holder, or on a determination of incapacity of an interest holder.
All transparency reports must contain a wide variety of information, especially the information on each individual who is an interest holder of the reporting body, such as their full name; citizenship status, city, province, and country of principal residence ("Primary Identification Information"). Transparency reports will also include interest holders' date of birth, last known address, social insurance number or individual tax number; and a description of how the individual is an interest holder;
We note that Relevant Corporations, Relevant Partnerships, and Relevant Trusts each have specific information that their respective transparency reports must also contain.
Publicly Accessible Information and Access to Filed Transparency Reports
The Primary Identification Information of reporting bodies, interest holders and settlors submitted in transparency reports are "Publicly Accessible Information" and will be found on the Land Owner Transparency Registry, a publicly searchable registry (managed by the Land Title Survey Authority) after a 90-day withholding period that starts from the time a transparency report is submitted.
The information in filed transparency reports will be available to the Canada Revenue Agency, the RCMP, the BC Securities Commission, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and tax authorities of other jurisdictions if Canada has an arrangement, written agreement or treaty with that jurisdiction.
Extensive Enforcement and Heavy Penalties and Fines
Enforcement officers have broad powers, including the authority to enter the reporting body's business place or records office to inspect records, obtain information, and remove records for the purposes of inspection or for making copies.
Enforcement officers may also impose an administrative penalty for contraventions of LOTA, including providing false or misleading information or failing to file a transparency report, up to the greater of: (a) $50,000 and 5% of assessed property value for non-individuals, or (b) $25,000 and 5% of the assessed property value for individuals.
Further, contraventions of the LOTA can constitute an offence. If convicted of an offence under LOTA, depending on the severity of the offence, non-individuals may be liable for a fine (a) up to $100,000, or (b) is the greater of $50,000 and 15% of the assessed property value. Individuals meanwhile, may be liable for (a) a fine up to $50,000 or (b) one that is the greater of $25,000 and 15% of the assessed property value.
Anticipated Implementation Date: Three Tranches
The provincial government released the Land Owner Transparency Regulation (the "Regulation"), which will come into effect at the same time as LOTA on November 30, 2020. The Regulation specifies that certain provisions dealing with the proposed publicly searchable registry will come into force on April 30, 2021.
Meanwhile, the reporting requirements will be incorporated into the property transfer tax filings, with implementation expected to occur in three tranches:
- Tranche 1: all new owners to submit transparency declarations and transparency reports, if applicable, with any applications to register an interest in land.
- Tranche 2: any changes in existing land interests of reporting bodies.
- Tranche 3: all existing reporting bodies with an interest in land.
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.