BURST
A couple who bought a Richmond property will have to pay the foreign-buyers tax on the full amount of their purchase price, according to a B.C. Court of Appeal ruling that upheld a lower court decision.
That means they must pay an additional $70,000.
The couple had registered their ownership as 95 per cent for Chia-Wen Hsia, a Canadian citizen, and five per cent for Li-Yuan Chuang, a Chinese citizen, whom Hsia was engaged to marry.
They paid the foreign-buyers tax only on the five per cent owned by Chuang, even though he had paid for 40 per cent of the $474,500 two-bedroom condo in Richmond, according to court and B.C. Land Title records. Hsia was registered as owning the other 95 per cent of the property.
They bought the property in March 2017 and married that December.
After an audit, the B.C. Minister of Finance determined that Hsia was a taxable trustee, meaning she held some of Chuang’s ownership in trust, which meant they had to pay the foreign-buyers tax on the entire purchase price.
In a written decision released this month, B.C. Court of Appeal Justice Margot Fleming agreed with the province that the foreign-buyers tax legislation expressly says a Canadian citizen must pay the tax when they hold legal title for the benefit of a foreigner.
“The taxable trustee provisions recognize that to achieve the aim of the (tax), the scheme needs to prevent tax avoidance by foreign investors who own beneficial interests held indirectly by others,” wrote Fleming in the three-member panel decision.
“This approach is also consistent with the (tax) provisions more broadly, drafted as they are to capture the multiple ways that foreign investment may be reflected in the various ways residential property can be held,” added Fleming.
The so-called foreign-buyers tax is an additional transfer tax of 20 per cent that foreigners must pay on purchases of property in B.C. It was at 15 per cent in 2017 and increased to 20 per cent in 2018.
The foreign-buyers tax was introduced by the then-B.C. Liberal government of Christy Clark in 2016 in Metro Vancouver to make property purchases more expensive for foreign nationals, and was meant to cool down an overheated housing market and improve affordability. The tax was later expanded to the Fraser Valley, Victoria, Nanaimo and Kelowna and remains in place.
The other panel judges — Justice Lauri Ann Fenlon and Justice Heather MacNaughton — agreed with Fleming’s decision.
Hsai and Chuang had argued if the foreign-buyers tax did apply to them both, that it should only be applied to the 40 per cent investment made by Chuang. The Appeal Court rejected that argument.
In 2021, the foreign-buyers tax withstood a constitutional appeal at B.C.’s highest court, which said it was clear the dominant purpose of the tax was to foster housing affordability. That case had argued the tax was related to historical patterns of discrimination in the province.
In a letter last summer, some of the biggest names in B.C. real estate asked the federal government to reconsider its ban on foreign entities purchasing residential property in Canada, and for the B.C. government to reconsider its tax on foreign buyers.
But Premier David Eby said that the old model is dead and rebuffed the developers’ request for foreign real estate investment.