The province of British Columbia is increasing disclosure when real estate purchases are made through a corporation or trust, with an eye to reducing tax evasion.
British Columbia, and in particular Vancouver, has some of the highest real estate prices in the country, and the current provincial government has made it a priority to increase affordability in the market, such as implementing a foreign buyers’ tax. And Finance Minister Carole James said these new changes will give authorities “another tool to make sure people are paying the taxes they owe.”
“Our government has been clear that the days of skirting tax laws and hiding property ownership behind numbered companies and trusts are over,” she said. “Not only is tax evasion in real estate fundamentally unfair, but it’s driving up the cost of housing for people who live and work in our communities.”
Starting Sept. 17, the new property transfer tax return will require people to report additional information when a transaction is structured through a corporation or trust. This will allow government to identify people with a significant interest in the property and ensure the correct amount of tax is paid. The updated return will require the individual’s name, date of birth, citizenship information, contact details and tax identification numbers such as a social insurance number.
The new reporting requirements will apply to all property types, including residential and commercial. There will be exemptions for certain trusts, such as charitable trusts, and certain corporations, such as hospitals, schools and libraries.
But Jonathan Reilly, managing partner at Vancouver’s English Bay Law Corporation, said so far the government has only provided solutions that require spending tax dollars rather than considering approaches that would result in more housing at an affordable price that requires less intervention by the government in the market.
“The government’s solutions [on affordability] have not done anything to stabilize the market,” he said. “Instead, they have pitted one group of buyers against another and have driven demand out of the housing market.”
Reilly noted prices for homes on the tony west side of Vancouver have come down about 25 per cent but prices in the condo market, where he says most people in the province are buying homes, haven’t changed.
“If you own a $5 million home, it’s now worth $1 million less. But people aren’t buying $5 million homes, most people are buying in the $750,000 to $1.5 million range, and that’s the condo market,” he said. “A drop in the $5 million housing market, that really doesn’t help your average person — the only people that is going to help is developers.”
Reilly said there are other things the province could be doing, such as reducing the amount of time it takes to get development approval to build new stock.
“Most development, if not all, is financed, and one of the largest costs in the development is the interest to the lenders on the acquisition and construction costs,” he said. “So if [the government] was more efficient in giving its approvals, then we could have more stock, and I think the real problem [in the housing market] is the shortage of stock.”
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Article by thelawyersdaily.ca