Buying BC Property Through a Corporation: Pros, Cons and Transparency Filings

Investors and business owners often ask whether they should buy their next property personally or through a company. A corporation can separate an investment from your personal affairs and fit into a wider business plan, but it is not automatically the better choice.

Corporate ownership changes how lenders treat you, which property transfer tax exemptions you can claim, and what you must file with the Land Title Office and keep in your company's records. This article sets out the main points to discuss with your lawyer and accountant before you sign.

Why buyers consider a corporation

There are a few common reasons people look at buying through a company:

• Separating the investment. A corporation is a separate legal person. Property held by the company, and the company's debts, are kept apart from your personal assets, subject to any personal guarantees you sign.
• Fitting a business plan. A business owner may want the building the business operates from held in a separate company, or may want rental income to stay inside a corporate structure.
• Bringing in partners. Shares can make it easier to record each investor's stake, set voting rights and plan for one investor leaving, especially with a shareholders' agreement.
• Estate and succession planning. Shares in a company can be easier to deal with in some estate plans than land held personally, although this depends heavily on the overall plan.

If you are deciding between a single company and a holding structure, our article on when a holding company makes sense in BC covers the basics.

The trade-offs

Corporate ownership has real costs and limits, and they often decide the question.

• Financing. Many residential lenders treat corporate borrowers differently, and lenders commonly ask the shareholders for personal guarantees. That can reduce the liability separation you were hoping for.
• Tax. Income tax treatment of rental income, the principal residence exemption and the cost of getting money out of the company all change when a corporation owns the property. These are questions for your accountant before you buy, not after.
• Ongoing administration. A company needs annual reports, records, minutes and, for a private company, a transparency register. Those costs continue for as long as the company holds the property.
• Moving property later. Transferring a property you already own into a company is usually a new registered transfer, with its own tax and filing consequences. Planning before the purchase is usually simpler than restructuring afterwards.

Property transfer tax for corporate buyers

Under section 2 of the Property Transfer Tax Act, the transferee pays property transfer tax and files a return when the transfer is registered. A corporation that buys land is a transferee like anyone else. For how the general tax is calculated, see our guide to BC property transfer tax rates and exemptions.

Two points matter in particular for corporate buyers:

• First time home buyers' exemption. The Act defines a "first time home buyer" in section 4 as an individual who meets citizenship or permanent residence and other conditions. A corporation does not fit that definition, so a purchase in a company's name does not qualify for that exemption.
• Additional tax on foreign entities. Section 2.02 imposes an additional tax when residential property in a specified area is transferred to a foreign entity or taxable trustee. Under section 2.01, a foreign entity includes a foreign corporation, which covers a corporation incorporated outside Canada and, unless its shares are listed on a Canadian stock exchange, a Canadian corporation controlled by foreign nationals or foreign corporations. Whether this applies depends on who controls the company, so it needs to be checked before the contract is signed.

The land owner transparency filings

The Land Owner Transparency Act applies whenever someone applies to register an interest in land, such as a transfer of title.

• Transparency declaration. Under section 10, every transferee must file a transparency declaration with the application to register. It states whether the transferee is a reporting body, such as a relevant corporation, a trustee of a relevant trust or a partner of a relevant partnership.
• Transparency report. Under section 12, if the interest is to be registered in the name of a relevant corporation, the corporation must also file a transparency report with the application to register. The report identifies the corporation's interest holders.
• Who is an interest holder. Under section 3, an individual is a corporate interest holder if, among other things, they hold, as registered or beneficial owner or through indirect control, 10% or more of the issued shares or of the voting rights, or have rights that would let them elect or remove a majority of the directors.
• Keeping it current. Under section 16, if the last report no longer discloses the current interest holders, the corporation must file a new report within 2 months after it becomes aware, or reasonably ought to have become aware, of the change.

Much of this information becomes searchable. Section 35 lets members of the public search the registry by a person's name or by parcel identifier and obtain the publicly accessible information, subject to the administrator's conditions and the rules on omitting information.

The company's own transparency register

Separately, Part 4.1 of the Business Corporations Act requires a BC private company to maintain a transparency register of its significant individuals. The threshold here is different: under section 119.11, it is generally 25% or more of the issued shares or voting rights, or the ability to control a majority of the board.

The company must review the register each year (section 119.3) and record new or changed information within 30 days after becoming aware of it (section 119.31). Under the current text of section 119.61, the register is not open to the public: it can be inspected by directors and by the officials the Act authorises, such as for tax, law enforcement and regulatory purposes. Amendments passed in 2023 to create a public register are not yet in force.

Questions to settle before you buy

• Who will own the shares, and in what proportions?
• Is the company Canadian-controlled for property transfer tax purposes?
• Will the lender accept a corporate borrower, and on what personal guarantees?
• Has your accountant reviewed the income tax and exit costs?
• Is there a shareholders' agreement dealing with exits, deadlock and death?
• Who will prepare and certify the transparency declaration and report on registration?

Buying through a company? Get the structure and filings right before completion

Our real estate lawyers can review the purchase contract and corporate structure, coordinate with your accountant and lender, and prepare the property transfer tax return and land owner transparency filings for registration.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.