The Ministry of Finance (Ontario) (the "Ministry") issued guidance relating to the administration of the recent amendment to the exemption from Land Transfer Tax ("LTT") in respect of small accretions of partnership interests. The guidance explains how the Ministry intends to implement the amendment and, in a welcome development, sets out some significant limits on its retroactive application.
LTT is exigible on the disposition of a beneficial interest in land, which includes any interest in a partnership that holds land. There is an exemption from LTT where there is a disposition of a beneficial interest in land if it was a transfer of a partnership interest that represented no more than 5% of the interests in the partnership (the "de minimis exemption"). However, on February 18, 2016, the Ministry introduced Ontario Regulation 35/16 which retroactively amended the de minimis exemption so that it does not apply where a trust or another partnership acquires an interest in a partnership. The Ministry stated that the amendment was designed to "clarify" the application of the de minimis exemption. As such, the amendment took effect retroactive to July 19, 1989, the date the de minimis exemption became effective.
Updated Compliance Guidance
In an updated publication pertaining to the amendment, the Ministry provided the following guidance with respect to dispositions of a beneficial interest in land through one or more partnerships:
- The Minister will only assess or reassess dispositions that occurred on or after February 18, 2012;
- The Ministry will not initiate prosecutions under the Land Transfer Tax Act (Ontario) for dispositions that occurred prior to February 18, 2016;
- Returns for dispositions on or after February 18, 2016 will be due the later of the thirtieth day after the date of the disposition and January 1, 2017 and interest will not start to accrue for such dispositions until January 1, 2017;
- There is a special voluntary disclosure policy ("SVDP") that will apply only to dispositions that occurred on or before February 17, 2016.
THE SPECIAL VOLUNTARY DISCLOSURE POLICY
The SVDP generally has the same requirements as the Ministry's general voluntary disclosure policy. As mentioned above, the SVDP only applies in respect of dispositions of a beneficial interest in land through one or more partnerships that occurred on or before February 17, 2016. If a disclosure meets the SVDP requirements, the Ministry will not assess penalties in respect of the reported dispositions and it is proposed that interest will not apply from the time of disposition up to December 31, 2016. SVDP disclosures must be made on or before December 31, 2016.