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O. Reg. 350/08: Exemption(s) - For Certain Conveyances of Family Farms or Family Businesses

filed October 10, 2008 under Land Transfer Tax Act, R.S.O. 1990, c. L.6

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ontario regulation 350/08

made under the

Land Transfer Tax Act

Made: September 24, 2008
Filed: October 10, 2008
Published on e-Laws: October 14, 2008
Printed in The Ontario Gazette: October 25, 2008

Amending Reg. 697 of R.R.O. 1990

(Exemption(s) — For Certain Conveyances of Family Farms or Family Businesses)

1. (1) The definition of “active business” in subsection 1 (1) of Regulation 697 of the Revised Regulations of Ontario, 1990 is revoked and the following substituted:

“active business” means a business that is not,

(a) farming,

(b) the leasing of real property, or

(c) a business that, within the meaning of the Income Tax Act (Canada), is a personal services business or a specified investment business;

(2) The definition of “family business corporation” in subsection 1 (1) of the Regulation is revoked and the following substituted:

“family business corporation” means a corporation that is a Canadian-controlled private corporation, within the meaning of the Income Tax Act (Canada), all of whose issued shares other than directors’ qualifying shares are owned by members of the family of an individual;

(3) The definition of “family farm corporation” in subsection 1 (1) of the Regulation is revoked.

(4) The definition of “taxation year” in subsection 1 (1) of the Regulation is amended by striking out “Corporations Tax Act” at the end and substituting “Income Tax Act (Canada)”.

(5) Subsection 1 (2) of the Regulation is revoked and the following substituted:

(2) For the purposes of this Regulation, a corporation is a family farm corporation at the time of a conveyance of land to or from the corporation if all of the following conditions are satisfied:

1. All of the issued shares of the corporation at the time of the conveyance, other than directors’ qualifying shares, are owned by one or more persons, each of whom is,

i. a member of the family of each transferor, if the conveyance of land is to the corporation, or

ii. a member of the family of each transferee, if the conveyance is from the corporation to one or more transferees.

2. At least 95 per cent of the value of the corporation’s assets at the time of the conveyance, including the land being conveyed, is attributable to farming assets.

3. If a member of the family of a transferor referred to in subparagraph 1 i or a transferee referred to in subparagraph 1 ii is a corporation, at least 95 per cent of the value of the total assets of that member of the family is attributable to farming assets.

2. Subsection 2.1 (1.1) of the Regulation is amended by striking out “those sections” and substituting “that section”.

3. The Regulation is amended by adding the following section:

2.2 (1) Section 2 of the Act does not apply to a conveyance of land from a corporation that is a family farm corporation at the time of registration of the conveyance to one or more individuals, each of whom is a member of the family of the other individual if the following conditions are satisfied:

1. Before the conveyance, the land was used predominantly in farming that was carried on exclusively under the direction of one or more persons, each of whom is a member of the family of each individual who is a transferee of the land being conveyed.

2. The land is being conveyed for the principal purpose of enabling one or more individuals to continue farming on the land.

3. Each person who owns shares of the family farm corporation, other than directors’ qualifying shares, is a member of the family of each of the individuals referred to in paragraph 2.

(2) A conveyance referred to in subsection (1) may be registered without the payment of tax under section 2 of the Act if each transferee completes the form approved by the Minister, the form is attached to the conveyance tendered for registration and the form is filed with the Minister or the collector.

4. Section 3 of the Regulation is revoked and the following substituted:

3. (1) Section 2 of the Act does not apply in respect of a conveyance of land from one or more individuals, each of whom is a member of the family of the other, to a corporation that is a family business corporation on the day the conveyance is registered if the following conditions are satisfied:

1. Before the conveyance, the land was used predominantly in the operation of an active business that was operated exclusively by one or more individuals each of whom is a member of the family of each transferor of the land.

2. At the time the conveyance is registered, all of the issued shares of the family business corporation other than directors’ qualifying shares are owned by one or more persons each of whom is a member of the family of each transferor of the land.

3. The principal purpose for the conveyance is to enable the family business corporation to continue to operate the active business on the land under the direction of one or more persons each of whom is a member of the family of each transferor of the land.

4. The family business corporation has a taxable income, as determined under the Income Tax Act (Canada), for its first taxation year ending after the day the conveyance is registered of less than $1.5 million.

5. The family business corporation derives at least 75 per cent of its gross revenue from an active business carried on in Canada during its first taxation year ending after the day the conveyance is registered.

6. If any shareholder of the family business corporation on the day the conveyance is registered is a corporation,

i. it derives at least 75 per cent of its gross revenue from an active business carried on in Canada during its first taxation year ending after the conveyance is registered, and

ii. its taxable income, as determined under the Income Tax Act (Canada), for that taxation year is less than $1.5 million.

(2) Despite subsection (1), a conveyance in respect of which it is reasonable to believe that tax may not be payable by reason of this section may be registered without the payment of tax only if,

(a) the corporation provides security for the tax that is satisfactory to the Minister; and

(b) the corporation provides to the Minister a form approved by the Minister and completed by an officer of the corporation indicating the conditions described in subsection (1) that are satisfied at the time the conveyance is registered.

(3) Subject to subsection (4), if tax is paid in respect of the conveyance or security is provided under subsection (2), the Minister shall refund the tax or return the security, as applicable, if,

(a) the corporation has provided to the Minister, in a form approved by the Minister and completed by an officer of the corporation, written confirmation that all of the conditions under subsection (1) have been satisfied; and

(b) the Minister is satisfied that this section applies to the conveyance.

(4) If, as a result of information obtained by the Minister, the Minister determines before the security is returned that any of the conditions set out in subsection (1) have not been satisfied in accordance with this section, the Minister may enforce the security for the payment of the tax and interest accrued under the Act.

5. (1) Subject to subsection (2), this Regulation comes into force on the day it is filed.

(2) Subsections 1 (3) and (5) and section 3 are deemed to have come into force on March 26, 2008.