The owner of a Burnaby lowrise apartment building has lost a bid to get out of a $6-million foreign buyer’s tax bill.
The four-storey apartment building at 5978 Wilson Ave. in Burnaby's Metrotown area was acquired by a numbered company (1164708 B.C. Ltd.) on Aug. 22, 2018 for $30 million, according to a B.C. Supreme Court ruling Tuesday.
The company paid $1,418,000 in transfer taxes but not the additional foreign buyer's tax, which applies to purchasers of residential property if the buyer is a "foreign entity" or "taxable trustee."
In December 2020, the Ministry of Finance assessed the company for an additional $6 million because it was "controlled" by a foreign corporation.
The company objected to the assessment, but the ministry decided after a review that its assessments had been properly made at the time of the purchase.
The company then launched an appeal in B.C. Supreme Court.
In a ruling, Justice Steven Wilson peeled back the layers of ownership involved in the 5978 Wilson Ave. property.
The numbered company that launched the appeal (1164708 B.C. Ltd.) holds the property in trust for another numbered company (1162509 B.C. Ltd.), both of which are B.C. corporations, according to the ruling.
The company that owns those two companies, Global Dingye Capital Ltd., is also a B.C. corporation.
But the owner of Global Dingye Capital Ltd. was Nanjing Dingye Investment Real Estate Group Co. Ltd., a company incorporated under the laws of the People's Republic of China.
That company, meanwhile, was controlled by majority shareholder Mailin Chen, a permanent resident of Canada.
The numbered company saddled with the $6-million tax bill argued it shouldn't be considered a "foreign corporation" simply because Nanjing was incorporated in China.
It argued a proper interpretation of the Income Tax Act is that "there can only be one person or entity that exercises ultimate control" – and that entity wasn't Nanjing but Chen, a permanent resident.
"Because Mr. Chen controls the majority of the shares in Nanjing, which controls Global, which in turn controls (1164708 B.C. Ltd.), no additional (property transfer tax) should be payable," said Wilson, summarizing the company's argument.
But Wilson disagreed.
He noted the term "controlled" is defined in the provincial legislation as controlled, directly or indirectly "in any manner whatever."
"I am satisfied that a plain reading of both the definition of 'controlled' under (the Property Transfer Tax Act) … and of the Income Tax Act would lead to the inescapable conclusion that Nanjing was a foreign corporation and that Global and the petitioner are therefore also foreign corporations," Wilson said.
He dismissed the company's petition.
Assessment
As of July 1, 2022, 5978 Wilson Ave. was worth $23,224,000, according to the latest BC Assessment numbers.
The land (0.6 acres) was valued at $23,127,000, while the four-storey, 38-unit building, built in 1967, was valued at $97,000.
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