On February 18, 2016, the Ontario Ministry of Finance published retroactive amendments to regulation 70/91 to the Land Transfer Tax Act (Ontario), pursuant to which an acquisition of an interest in a partnership that owns land in Ontario is generally not subject to Ontario land transfer tax so long as the acquirer’s interest in the partnership does not increase by more than five per cent (the “de minimis exemption”). This exemption has historically been relied on by real estate investment trusts (REITs) and other pooled investment vehicles acquiring real property in Ontario on the basis that the five per cent ownership test applies on a look-through basis to the ultimate beneficial owners.
Under the amended regulation, the de minimis exemption will not apply to any acquisition by a trust (including a REIT) or a partnership, regardless of how upstream ownership is distributed.
The amendments, which are described in the related Ministry of Finance release as “clarifying amendments”, are retroactive to July 19, 1989 (when the original de minimis exemption first came into force) and accordingly are applicable on their face to many completed transactions, including those that may currently be under review. It is highly unusual for the government to make such a significant change to tax legislation on a retroactive basis.
The Finance release indicates that an administrative exception will apply to transactions that were the subject of a written ruling by the Ministry issued on or before February 18, 2016.