B.C.'s Court of Appeal has upheld a $6-million foreign-homebuyers tax bill issued to the buyer of a Burnaby lowrise apartment building in 2020.
A numbered company, 1164708 B.C. Ltd., acquired a 38-unit, four-storey apartment building at 5978 Wilson Ave. in August 2018 for $30 million, according to a .
The numbered company paid $1.418 million in property transfer tax, but the Ministry of Finance investigated and advised the company in December 2020 that it owed another $6 million under the additional property transfer tax, also called the foreign-homebuyers tax.
The ministry said the numbered company was a "foreign entity" or "taxable trustee" because it was controlled by a corporation that wasn't incorporated in Canada or listed on a Canadian stock exchange, according to the ruling.
The multiple layers of ownership involved in the 5978 Wilson Ave. property were peeled back in the ruling:
1164708 B.C. Ltd. holds the property in trust for another numbered company (1162509 B.C. Ltd.), both of which are B.C. corporations.
At the time of the transfer, all shares in those two companies were owned by Global Dingye Capital Ltd., also incorporated in B.C.
But the sole shareholder of Global was Nanjing Dingye Investment Real Estate Group Co. Ltd., a company incorporated under the laws of the People's Republic of China.
That company, however, was controlled by majority shareholder Mailin Chen and minority shareholder Yongjin Yong, both permanent residents of Canada.
1164708 B.C. Ltd. argued it wasn't a foreign entity or taxable trustee despite its parent company's incorporation in China because the parent company's shareholders were permanent residents of Canada.
After unsuccessfully disputing the tax bill with the ministry and in , 1164708 B.C. Ltd. took its case to the B.C. Court of Appeal.
That court dismissed the case in a unanimous decision on March 7.
Justice Harvey Groberman, who wrote the decision, said the sole question on the appeal was whether Nanjing's status as a foreign corporation made the buyer of the apartment, 1164708 B.C. Ltd., a foreign entity or taxable trustee.
The court concluded it did.
Groberman noted the purpose of the foreign-homebuyers tax (amendments to B.C.'s Property Transfer Tax Act that came into effect in 2016) was to cool off housing markets in places where they are considered overheated by making it more expensive for foreign investors to buy.
1164708 B.C. Ltd. argued those concerns didn't apply when foreign corporations are owned or controlled by people who live in Canada, but Groberman disagreed.
"Where foreign corporations are involved in the chain of ownership, difficulties in obtaining foreign-based information can occur," he said. "Often, it will be difficult to ascertain where the foreign actor's funds come from."
Groberman said he saw nothing in the legislation's purpose that would prevent it from applying to foreign companies controlled by Canadian citizens or permanent residents "particularly where it is difficult or impossible to obtain information on the corporations' operations."
"The express purpose of the legislation is to reduce pressure on the local housing market by discouraging foreign investment," Groberman said.
The court upheld the Ministry of Finance and B.C. Supreme Court decisions and dismissed the appeal.
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