CANADA – QUÉBEC Law and Practice Contributed by: Eleonora Eusepi, Sabrina Guillot, Janie Chaloux and Nicolas Gosselin, BCF Business Law LLP
the property of others, and income may be taxed at either the trust or beneficiary level. Divided co‑ownership is not a legal entity but a form of shared ownership in which each investor holds an undivided share of the property. Income and losses are taxed directly in the hands of co‑owners, who col - lectively manage the asset. 5.3 REITs REITs in Québec may be privately held or publicly trad - ed, but, in all cases, must have at least 150 unitholders. They operate as income trusts that hold income‑pro - ducing real estate or related assets, forming a distinct patrimony separate from the settlor, trustees, and ben - eficiaries. Trustees manage the portfolio for the benefit of unitholders, who are taxed on distributions because REITs may deduct amounts paid to beneficiaries from their own taxable income. Distributions can consist of ordinary income, capital gains, or return of capital, depending on the REIT’s activities and results. When beneficiaries are non‑residents, withholding tax gener - ally applies, with rates varying based on the nature of the income and tax treaty provisions. To maintain REIT status, the trust must primarily hold income‑produc - ing real estate and comply with fiduciary governance requirements. For investors, REITs provide exposure to real estate without direct ownership obligations, offer - ing steady income, diversification, and greater liquidity than direct property holdings. 5.4 Minimum Capital Requirement There is no minimum capital requirement applicable to any of the investment vehicles discussed above. 5.5 Applicable Governance Requirements Entities used to invest in real estate in Québec are subject to governance requirements that vary by structure. Corporations, incorporated federally or pro - vincially, must comply with corporate law and trans - parency obligations. They are managed by a board of directors elected by shareholders, and directors owe duties of loyalty, prudence, and good faith while over - seeing major decisions such as acquisitions, financ - ings and dispositions. Québec’s transparency rules require disclosure of individuals exercising significant control, and federally incorporated companies must also maintain a register of such individuals.
Partnerships, whether general or limited, operate under a partnership agreement that outlines deci - sion‑making, management authority and partner responsibilities. General partners manage the part - nership and may bear personal liability, while limited partners benefit from limited liability provided they do not participate in management. Partnerships must maintain internal records and disclose individuals with significant control. A trust is a separate patrimony administered by trus - tees who owe strict fiduciary duties to beneficiaries and must maintain detailed records. Trusts carrying on commercial activities must disclose individuals who ultimately control or benefit from the trust when registering with the Business Registry ( Registraire des entreprises du Québec ). Undivided co‑ownership, often used when multiple individuals jointly acquire real estate, is governed by the Civil Code and by the indivision agreement entered into by the co‑owners. Each co‑owner holds an undivided share of the property and participates in decisions relating to its management, unless the agreement delegates certain powers to a manager or establishes a specific decision‑making process. Co‑owners owe each other duties of cooperation and must contribute to expenses and obligations propor - tionally to their shares. Because undivided co‑own - ership does not create a separate legal entity, clear documentation of ownership shares, management rules, and financial contributions is essential. The co- ownership agreement itself is subject to a statutory limit: it may not exceed 30 years, although it can be renewed upon expiry. 5.6 Annual Entity Maintenance and Accounting Compliance Legal entity maintenance annual costs are usually less than CAD1,000. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time A lease is the most common arrangement allowing the occupation and use of real estate for a limited
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