Is land transfer tax payable on a share purchase?

In a share purchase you buy the owners’ shares in a corporation, and the corporation keeps owning whatever it owned before, including any land or building. Land transfer taxes are written around land. The answer therefore starts from a simple point and then turns on what else the deal does. For how the two structures compare in general, see asset sale versus share sale.

What the tax is charged on

Ontario’s guidance says you pay land transfer tax when you acquire land or a beneficial interest in land, and that the tax is payable when the transfer is registered. British Columbia’s property transfer tax applies when you purchase or gain an interest in property registered at the Land Title Office. Neither page describes a tax on buying shares in the company that owns the property, so a share purchase that leaves title with the corporation does not itself register a taxable transfer.

When a share deal can still trigger it

The risk lies in what moves alongside the shares. Ontario lists land moving from a corporation to one of its shareholders, and land moving into a corporation in exchange for shares, as cases where the tax is based on fair market value. It also requires a separate return, with payment, when a beneficial interest in land is acquired and the transfer is not registered within a set period of closing. A pre-closing reorganization that moves the building into another company, or a deal that gives the buyer an interest in the land itself, can bring the tax into what looked like a plain share sale.

Québec and the other provinces

In Québec, a municipality collects a transfer duty from the new owner of an immovable on its territory under provincial law, and certain transfers involving companies are exempt only when the conditions provided are met for a set period. Other provinces have their own land or property transfer taxes with their own rules for corporations, so the rules of the province where the land sits are the ones to check.

What a buyer can ask

• Which parcels the corporation owns, confirmed by a title search, and whether any were transferred in the period before closing.
• Whether any reorganization before closing moved land into or out of the corporation.
• Whether the agreement leaves the buyer with shares only, or with any interest in the land itself.
• Who bears any land transfer tax that does arise, stated in the purchase agreement.