Permanent residents subject to foreign buyers tax because they used China-based company to purchase B.C. building
The provincial government was correct to impose its foreign buyers tax on a pair of permanent residents who paid $30 million to acquire a Burnaby apartment building in 2018, the B.C. Supreme Court has ruled.
Permanent residents of Canada are typically exempt from paying the tax, which was first introduced for Metro Vancouver properties in 2016 and has since been expanded to other areas of the province.
What made this case different was the complicated ownership structure behind the purchase, which included a company incorporated in China.
In a decision issued and posted online earlier this week, Justice Steven Wilson notes that the case is related to two others brought by a different company controlled by the same B.C. residents, which deal with "largely the same issue."
A decision in those two cases has not yet been issued.
COMPLEX OWNERSHIP STRUCTURE
All three cases involve companies owned by Mailin Chen and Yongjin Yong, who have both been permanent residents of Canada since 2009, according to the decision.
A diagram included as an appendix to Wilson's decision outlines the companies' ownership structure, which the judge also summarizes in writing.
Chen owns the majority of shares in a company called Nanjing Dingye Investment Real Estate Group Co. Ltd., which is incorporated in China. Yong holds the remainder of the shares in that company.
Nanjing is the sole shareholder of a B.C. company called Global Dingye Capital Ltd. That company, in turn, is the sole shareholder of two numbered B.C. companies involved in the purchase of 5978 Wilson Ave., a four-storey Burnaby apartment building with 38 units.
One of the numbered companies, 1164708 B.C. Ltd., purchased the building and holds it in trust for the other, 1162509 B.C. Ltd., referred to throughout the decision as the "beneficial owner."
1164708 B.C. Ltd. brought the case to court, and is referred to in the decision as the "petitioner."
A diagram included as an appendix to Wilson's decision outlines the companies' ownership structure.
Global – the named B.C. company owned by Nanjing – also owns 81.1 per cent of another B.C. company called Chunghwa Investment (Canada) Co. Ltd., with the remaining 18.9 per cent of Chunghwa owned by Chen directly.
Chunghwa is the owner of the properties at the centre of the two related cases: a single-family home on the corner of West 13th Avenue and Sasamat Street in Vancouver and a nine-bedroom, 10-bathroom mansion on Drummond Drive in the West Point Grey neighbourhood that was worth more than $14 million as of July 1, 2022, according to BC Assessment.
DEFINITION OF 'CONTROL' CHALLENGED
In the case decided by Wilson, the petitioner argued that B.C.'s Ministry of Finance had incorrectly interpreted the definition of "controlled" in the foreign buyers tax legislation.
"There can only be one person or entity that exercises ultimate control, and that person in this case is Mr. Chen," Wilson's decision reads, summarizing the argument.
"Because Mr. Chen controls the majority of the shares in Nanjing, which controls Global, which in turn controls the petitioner, no additional (property transfer tax) should be payable."
In response, the Attorney General of B.C. argued that it was the petitioner that was misunderstanding the statute.
"There can be simultaneous control of a corporation by different persons or entities and, since Nanjing was incorporated in China, Global and its subsidiaries, including the petitioner, are all foreign corporations," the decision reads, summarizing the province's argument.
In considering these arguments, Wilson referred to the provincial legislation, as well as the federal Income Tax Act, from which the B.C. law draws its definition of control.
The judge concluded that the petitioner's assertion that only one person or entity can exercise ultimate control relied on a single section of the federal law, which is expanded and elaborated on by other sections.
Taking the federal statute's definition of control in its entirety supports the province's position, and was clearly the intention of the provincial legislature when it wrote the B.C. law, Wilson found.
The decision notes that "a plain reading" of both laws "would lead to the inescapable conclusion that Nanjing was a foreign corporation and that Global and the petitioner are therefore also foreign corporations."
"Moreover, the mere fact that one can envisage situations where the question of control might be the subject of some debate does not render the legislation ambiguous," the decision continues.
"Even though I accept the petitioner's submission that it was not the legislature's intention to subject people such as Mr. Chen to the additional (property transfer tax), it is important to recognize that it is not Mr. Chen who is liable to pay the tax in this case. Rather, the tax is payable by the petitioner."
Wilson dismissed the case and awarded court costs to the Attorney General. The decision leaves the petitioner on the hook for a foreign buyers tax of $6 million.
CTVNews.ca Top Stories
Trudeau says he spoke with Trump after shooting, condemned political violence
The Prime Minister's office says Justin Trudeau spoke this afternoon with former president Donald Trump in the wake of a deadly shooting at one of his campaign rallies on Saturday.
DEVELOPING What we know about the 20-year-old man who tried to assassinate Donald Trump
The FBI identified 20-year-old Thomas Matthew Crooks of Bethel Park, Pa., as the suspect in Saturday's attempted assassination of former U.S. president Donald Trump at a campaign rally.
UBC investigating professor’s social media post following Trump assassination attempt
The University of British Columbia is investigating a now-deleted social media post from one of its faculty members that appeared to be wishing an assassination attempt on Donald Trump had been successful.
Biden warns of election-year rhetoric, saying 'it's time to cool it down'
U.S. President Joe Biden warned Sunday of the risks of political violence in the U.S. after Saturday’s attempted assassination of former president Donald Trump, saying, 'It's time to cool it down.'
What an ex-FBI agent noticed in the aftermath of Donald Trump rally shooting
An apparent assassination attempt has many questioning how a shooting that wounded former U.S. president Donald Trump was even possible.
LCBO reverses plan to open select stores on Friday as strike continues
The LCBO has reversed its plan to open select stores on Friday as retail workers continue to strike across the province, according to a statement from the Crown corporation on Sunday.
Obituary Shannen Doherty, '90210' actress, dies at 53, People magazine reports
American actor Shannen Doherty, best known for her role as high school student Brenda Walsh on hit 1990s television drama 'Beverly Hills, 90210,' has died at age 53 following a years-long battle with cancer.
Read the letter from Melania Trump responding to attempted assassination of Donald Trump
Former first lady Melania Trump issued her first public response since her husband, former President Donald Trump, was injured in a shooting at one of his rallies on Saturday.
Spain beats England 2-1 to win record fourth European Championship title
Spain is the king of European soccer for a record fourth time. For England, it's another agonizing near-miss in the team's decades-long tale of underachievement.