Share Purchase vs. Asset Purchase: Buying a Property in BC

What is the difference?

These structures can also cover an operating business, contracts and other assets. A share purchase is not simply an asset purchase with different paperwork: it changes the buyer’s relationship to the company and its past.

The BC PTT example: $2,000,000 property

BC general PTT is calculated on the fair market value of the land and improvements at registration. At exactly $2,000,000, the general-rate calculation is:

This assumes a taxable registered transfer, a $2,000,000 fair market value, no exemption and no additional tax. The 3% rate applies to value above $2,000,000, and residential property valued above $3,000,000 can also be subject to a further 2% tax on the residential portion over that threshold. [1, 2]

That is the potential $38,000 saving in this example. It is a potential difference in transaction costs—not a guaranteed tax result or a reason by itself to choose a share purchase.

Why might a buyer prefer an asset purchase?

An asset purchase can give the buyer more control over exactly what is acquired. The buyer can purchase the property and selected equipment or business assets, while leaving the seller’s company behind. That may make it easier to avoid unwanted corporate liabilities, subject to the purchase agreement, due diligence and any obligations that attach to the property itself.

• Defined scope. The agreement can identify the land, buildings and other assets included, along with any assumed contracts or liabilities.
• New tax cost base. The purchase price is allocated among acquired assets on a reasonable basis. CRA says reasonable asset values may be used to calculate capital cost allowance (CCA); the allocation should be agreed and reported consistently. [4]
• Cleaner company history. The buyer does not take ownership of the seller’s corporation just to acquire the property, although property, environmental, lease, title and other due diligence still matters.
• Potential GST/HST complexity. Tax depends on the property and transaction. Some qualifying sales of a business or part of a business may use a joint GST44 election, but conditions apply and the election does not make every property transfer tax-free. [4, 5]

On the other hand, a registered transfer of the land can trigger PTT, and the asset purchase agreement must address closing adjustments, existing financing, leases, permits and any GST/HST treatment.

Why might a buyer consider a share purchase?

A share purchase may preserve the existing corporate entity that holds title and may allow certain contracts, accounts or operating arrangements to continue in that company. Whether they continue depends on the documents: leases, loan agreements, permits, insurance and contracts may include change-of-control consent requirements or termination rights.

CRA notes that buying shares does not change the tax cost base of the corporation’s assets, and that a share purchase is generally not subject to GST/HST. [4] The buyer therefore does not simply receive a new tax cost for the building equal to the price paid for the shares. That distinction can matter to future deductions and to the value a buyer assigns to the deal.

The buyer also inherits the corporation—with its known and unknown tax, legal, employment, environmental, financing and contractual history. A share deal calls for careful corporate and financial due diligence, not less of it.

Which option is better?

There is no universal winner. A buyer may prefer the defined scope and asset cost base of an asset purchase. A buyer may consider a share purchase where continuity is valuable and the corporate records withstand thorough review. The seller’s tax position and preferences can also affect the price and willingness to agree to either structure.

What should you review before making an offer?

• Confirm who is on title and whether the corporation owns the property legally and beneficially.
• Ask a BC real estate lawyer to confirm the PTT treatment of the proposed transaction before valuing the expected saving.
• For a share purchase, review corporate financial statements, tax filings, liens, litigation, shareholder loans, leases, contracts, insurance and environmental information.
• Check the existing mortgage for payout costs, assumption terms, guarantees and change-of-control consent.
• Ask your accountant to compare tax consequences, the building’s existing tax basis, asset allocation, GST/HST and the seller’s after-tax proceeds.
• Include the proposed structure in the financing request. The lender may underwrite a share acquisition differently from a direct property purchase.

For a buyer, the practical comparison is the full cost and risk of each structure: purchase price, PTT, legal and accounting work, financing, corporate liabilities, tax basis and future exit. A headline PTT saving should sit beside those items—not replace them.