A B.C. Supreme Court judge upheld a $6 million foreign buyer tax bill to a company controlled by a developer linked to the Chinese government.
1164708 B.C. Ltd. acquired a 38-unit, four-storey apartment building at 5978 Wilson Ave. in Burnaby in August 2018 for $30 million. The numbered company paid $1.418 million in property transfer tax. In December 2020, the Ministry of Finance notified the company that it was also liable for a $6 million foreign buyer tax bill, because the registered owner was a taxable trustee and the beneficial owner a foreign corporation.
At the time of the transfer, 1164708 B.C. Ltd.’s sole shareholder and beneficial owner was 2015-incorporated Global Dingye Capital Ltd., whose sole shareholder was China-based Nanjing Dingye Investment Real Estate Group Co. Ltd.
Nanjing Dingye’s majority shareholder was Chen Mailin and minority shareholder Yong Yongjin, both permanent residents of Canada since August 2009. Chen also heads developer Chunghwa Investments (Canada) Co. Ltd., which is behind the Bridgeport Centre commercial development near the Oak Street Bridge in Richmond.
Justice Steven Wilson heard the case on Sept. 22 and rendered his decision on Oct. 24.
Lawyers for Chen argued that the companies should not be considered foreign under the Property Transfer Tax Act because they were ultimately controlled by permanent resident Chen.
However, Wilson said that the legal definition of controlled under relevant laws “would lead to the inescapable conclusion that Nanjing was a foreign corporation and that Global and the petitioner are therefore also foreign corporations. As a result, additional property transfer tax is payable as 5978 Wilson Avenue was purchased in the name of the petitioner.”
Wilson said the real estate tax law was enacted and eventually upheld by the B.C. Court of Appeal “to address the lack of affordable housing in certain areas of the province by subjecting foreign purchasers to an additional tax with a view to reducing demand.”
“However, 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 wrote.
Wilson concluded that the tax assessment was “simply a consequence of how Mr. Chen and his companies have chosen to structure their affairs. As such, while the result here was undoubtedly avoidable from Mr. Chen’s perspective, it is not an absurd outcome.”
Chen is the former duck farmer who became a hotel and construction tycoon in China and appointee representing Nanjing in the Chinese People’s Political Consultative Conference.
In late 2014, Chen acquired tech magnate Don Mattrick’s Northwest Point Grey mansion for almost $52 million.
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