The Quebec government has deposited new regulations to give effect to measures announced in the March budget.
Among the clarifications are confirming that exemptions for inter corporate transfers are based on 90 per cent issued shares and not voting shares, a trigger on change of control within 24 months of an exempt transfer, clarifying that options to purchase shares are captured within the anti-avoidance provisions as well as clarifying that amalgamations are exempt transfers.
No relief was included for transfers among closely related limited partnerships.
Share purchases which are not accompanied by an off title transfer of beneficial ownership will generally continue to be exempt.
The most significant change is to capture off title transfers.
It is not clear however where a transaction involves both the transfer of title from a nominee and a beneficial owner whether the off title transfer constitutes a separate transfer and hence creating risk for double taxation.
The emerging practice will likely involve having the nominee and beneficial owner both execute the registered transfer deed (the beneficial owner likely as an intervenant but defined as transferor in the transfer duty declaration).
Conversely when acquiring property buyers will either include the beneficial owner in the registered deed or ensure that their nominee arrangement is in place before acquiring the property and only have the nominee acquire as agent.
These rules will have a retroactive effect to the March 2016 budget and impose substantial fines for non- compliance.
These changes herald a modernisation of the process of taxing real estate transactions and likely simplify holding structures.