14 July 2020
New Requirements to Identify Canadian Non-Resident Real Estate Purchasers at the Québec Land Registry
On February 13, 2019, the draft Règlement sur le formulaire de présentation de la réquisition d’inscription d’un transfert immobilier (the “Regulation“) amending an Act respecting duties on transfers of immovables was published in the Gazette officielle du Québec for a 45-day consultation period. The Regulation would require Canadian non-resident purchasers of properties to be identified at the Land Registry. We can only surmise that legislating the monitoring of this information will stream-line the application of current Canadian non-resident withholding tax rules and create an infrastructure that will facilitate the enactment and enforcement of any future taxes which may be applicable in the context of real estate transactions involving Canadian non-residents. The draft Regulation is scheduled to come into force on October 1, 2020.
The Regulation sets out that when submitting an application for registration to the Land Registry Office, in addition to the information already required by Article 2982 of the Civil code of Québec, the following particulars in respect of each of the transferor and the transferee to a real estate transaction will now also need to be provided.
In the case of a natural person:
- their citizenship;
- if applicable, their permanent resident status, as defined in the Immigration and Refugee Protection Act; and
- the intention for the immovable to be occupied as a principal residence by them or a member of their family.
In the case of a legal person:
- the state, province or territory in which it was constituted; and
- whether it is a resident in Canada within the meaning of the Income Tax Act (the “Act”).
In the case of a trust or a partnership:
- the state, province or territory in which the contract establishing the trust or forming the partnership was entered into;
- in the case of a general partnership, whether at least half of its members are foreign nationals within the meaning of the Act;
- in the case of a limited partnership, whether a general partner is a foreign national; and
- in the case of a trust, if the trust is a resident in Canada.
- New Property Transfer Tax?
As a response to the increase in the number of foreign purchasers over the years, Ontario and British-Columbia have imposed an additional property transfer tax (sometimes going up to 20% of the value of the property) on non-resident purchasers of residential real estate in specified areas of these provinces, namely Toronto and Vancouver, in the hopes of normalizing the market. While, for the time being, Québec has expressed little interest in following suit, there is nevertheless speculation that the enactment of the Regulation might be the Québec government’s first step towards eventually imposing the same special tax on foreign buyers in the province as the real estate market continues to heat up.
- Increases in Legal Responsibility and Legal Fees
We echo the concern voiced by the Chambre des notaires du Québec that the new requirements under the Regulation will increase the burden on legal professionals when accompanying their clients in making their declarations given, in particular, that determining the residency status of legal persons is not always a straightforward analysis and could require the input of tax professionals. It is suggested that the increased responsibility this would entail for legal professionals would result in significant additional legal fees for the parties to the transfer.