A couple in British Columbia has been ordered by the B.C. Court of Appeal to pay the foreign-buyers tax on the entire purchase price of their Richmond property, amounting to an additional $70,000. The ruling affirms a lower court's decision, impacting how the tax is applied when a Canadian citizen holds legal title for a foreign national.
Key Takeaways
- A couple must pay the foreign-buyers tax on the full value of their Richmond property.
- The tax applies even when a Canadian citizen holds legal title for a foreign national.
- The B.C. Court of Appeal upheld a lower court's decision, reinforcing the province's stance on tax avoidance.
The Case Details
The couple, Chia-Wen Hsia (a Canadian citizen) and Li-Yuan Chuang (a Chinese citizen and Hsia's fiancé at the time), purchased a condo in Richmond in March 2017. They registered Hsia as owning 95 percent and Chuang as owning 5 percent of the property. Despite Chuang contributing 40 percent of the $474,500 purchase price, the couple initially paid the foreign-buyers tax only on Chuang's 5 percent share.
The Province's Determination and Court Ruling
Following an audit, the B.C. Minister of Finance determined that Hsia was acting as a taxable trustee, holding a portion of Chuang's ownership in trust. This meant the foreign-buyers tax was applicable to the entire purchase price. The B.C. Court of Appeal, in a decision released this month, agreed with the province. Justice Margot Fleming stated that the legislation is designed to prevent tax avoidance by foreign investors who use indirect ownership structures.
Understanding the Foreign Buyers Tax
The foreign-buyers tax, introduced in 2016 by the B.C. Liberal government, is an additional property transfer tax aimed at cooling down the overheated housing market and improving affordability. Initially set at 15 percent in 2017 and increased to 20 percent in 2018, it applies to foreign nationals purchasing property in designated areas of British Columbia. The tax has since been expanded to other regions, including the Fraser Valley, Victoria, Nanaimo, and Kelowna.
Rejection of Alternative Arguments
Hsia and Chuang had argued that if the tax were to apply to both of them, it should only be calculated based on Chuang's 40 percent investment. However, the Appeal Court panel, including Justices Lauri Ann Fenlon and Heather MacNaughton, rejected this argument, upholding the principle that the tax applies to the full value when a Canadian citizen acts as a trustee for a foreign national.
