B.C. court upholds $6M foreign homebuyers tax assessed on Burnaby property

The British Columbia Court of Appeal has dismissed the claim of a company fighting $6 million in foreign homebuyers tax assessed on the purchase of a $30 million, 38-unit low rise apartment building in Burnaby, B.C.

The issue, spelled out in the decision written by Justice Harvey Groberman, was whether the purchaser's parent company, which is incorporated in China but whose shareholders are permanent residents of Canada, should be considered a foreign entity under the Property Transfer Tax Act.

The Metrotown neighbourhood property at 5978 Wilson Ave., was bought in 2018 with $1,418,000 in general property transfer tax paid at that time. 

But in December of 2020, the Ministry of Finance advised the owner that after an investigation, and an additional $6 million in Additional Property Transfer Tax — also known as the foreign homebuyers tax — was being assessed because the controlling corporation of the purchasing company was "neither incorporated in Canada nor listed on a Canadian stock exchange."

The $6 million assessment was appealed, first to the ministry and then to the Supreme Court of B.C., before being brought before the higher court.

Groberman's reasons unpick the web of companies ultimately involved in the property purchase.

The entity bringing the appeal, 1164708 B.C. Ltd., held the property in trust of another B.C. numbered company, 1162509 B.C. Ltd.

At the time of the purchase, all shares in those two companies were owned by a third B.C. corporation, Global Dingye Capital Ltd. Global Dingye had a sole shareholder, Nanjing Dingye Investments Real Estate Group Co. Ltd., which was incorporated under the laws of the People's Republic of China. 

The decision says the majority shareholder of the Nanjing corporation, Mr. Mailin Chen, and the minority shareholder, Ms. Yongjin Yong, are both permanent residents of Canada. 

In upholding the lower court decision, Groberman said: "The purpose of the statute (cooling the housing market by making residential property in British Columbia less attractive to foreign buyers) is not inconsistent with an interpretation that includes foreign corporations owned by citizens or permanent resident of Canada as foreign 'entities.'"