He’s making a list,

Checking it twice,

Gonna find out who’s naughty or nice.

- Santa Claus Is Coming To Town

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Just like Santa, governments make lists to find out who’s been naughty.

In British Columbia (BC), the Land Owner Transparency Registry (LOTR) and Corporate Transparency Registry (CTR) are (or will soon be) public databases listing the beneficial owners of land and corporate interests. These registries were created to help governments of all levels - and across borders - to counter money laundering and the financing of terrorism.

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Unlike Santa’s private list, the LOTR and CTR will be available to the public to search, at no or nominal cost. If your name and information are going to be included, the responsibility to notify you lies with another party – not the government.

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This means that your personal information could end up in a public registry without notice from the government – only from another party who may not be fully aware of their obligations.

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So, how do you know whether you are a beneficial owner of land or company shares, and whether your name could appear on these registries? Read on.

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Land Transparency

Since November 30, 2020, all transfers of land in BC have required buyers to file a transparency declaration. The declaration serves to compel disclosure of other “beneficial owners” [1] – the individuals who ultimately own or control the property.

Entities like bare trustees, nominees, and non-natural persons (such as corporations, trusts, and partnerships) typically have beneficial owners who must be disclosed.

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Joint Ownership of Land and Bare Trusts

Most landowners in BC begin as sole or joint owners. While it is common for couples to own property via joint tenancy, for other variations of joint ownership, the tax implications are tricky to navigate. For example, parents may add an adult child on the title of their home (or another property) to avoid probate fees on death. Even if that transfer is exempt from property transfer tax, for income tax purposes the parent is considered to have transferred half the property. This can impact the principal residence exemption, and often involves other income tax implications.[2]

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Bare trust arrangement have often been used to avoid property transfer tax, allowing beneficial ownership to transfer without changing title. For example, an individual may transfer beneficial ownership of land to a holding company as part of an estate freeze, but remain on title as bare trustee. In the case the parent adding a child on title – often exempt from property transfer tax – a bare trust can help to manage the income tax implications.

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Corporate Transparency

Since October 1, 2020, most private companies in BC have been required to keep and maintain a registry of beneficial owners.[3] Although the type of information required is similar to the LOTR, corporate transparency rules are broader, covering influence, control and relationships where parties act in concert.

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Once the public corporate transparency register rolls out, companies in BC won’t be able to file annual reports without submitting beneficial owner details.

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Corporate-Owned Land and Trust Planning

Where corporate and land transparency overlap, as is the case for BC Companies that own land, it will be critical to ensure consistency between LOTR and CTR filings. Before reporting land ownership, companies should review their corporate transparency register and seek legal advice if needed. Likewise, corporate administrators or directors responsible for maintaining records should review past LOTR filings before submitting information to the CTR.

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As the LOTR and CTR work together, it will soon be easy to identify beneficial owners of land and their companies in BC – regardless of whether those individuals have done anything wrong. While criminals should not be able to hide behind corporate entities, law-abiding taxpayers should still have the right to organize their affairs privately and legally.

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One notable concern is that company owners who’ve followed sound tax and estate planning advice may find their family trust information — including beneficiaries — made public. These decisions are deeply personal, and this level of exposure represents a significant erosion of privacy.

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Conclusion

However earnest the government’s push for transparency may be, it also needs to protect the freedoms and privacy of its citizens. Currently, the LOTR cannot be searched without registering for a LTSA account. We expect the CTR to have similar safeguards. Still, these safeguards may not be sufficient.

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What’s clear is that tax authorities in Canada — and possibly abroad — will have access to this transparency information. As such, clients would be wise to ensure that their legal and tax advisors are aligned across land transparency, corporate filings, and annual tax returns (including new trust reporting obligations).

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Now is the time to review and update your business succession and estate plans.

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End notes

[1] As defined in the Land Owner Transparency Act, SBC 2019, c 23.

[2] There are other material legal risks involved in adding a child on title as joint owner. Seek legal advice for your circumstances before making any change to title.

[3] While the Business Corporations Act, SBC 2002, c 57, does not define “beneficial owner”, it does define “beneficially own” as including ownership through any trustee, personal or other legal representative, agent or other intermediary.

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