Real Estate Law Blog

On March 7, 2025, the British Columbia Court of Appeal released its decision to uphold the ruling of the lower court. In this unanimous decision, the Court of Appeal agreed with both the Minister of Finance and the Supreme Court of British Columbia on the interpretation of “control” in the B.C. Property Transfer Tax Act, finding that the owner of the property in question remains liable to pay $6,000,000 in additional property transfer taxes on an acquisition of a property with a purchase price of $30,000,000.

This case underscores the importance of carefully assessing potential tax implications when structuring corporate ownership of real estate investments in B.C.

See our previous blog (authored by Jack Yong, Jisoo Vis, Lisa Harder and Xue Zhang) on the Supreme Court of British Columbia decision below:

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On October 24, 2023, the Supreme Court of British Columbia issued a decision finding that additional property transfer taxes of $6,000,000 were payable on a residential property, both the registered and beneficial owner of which were British Columbia companies and which were ultimately controlled by a Canadian permanent resident.  The results of this case are a stark reminder of the importance of having a clear understanding of the Property Transfer Tax Act when purchasing residential property, especially when the ownership structure involves foreign components.

In August of 2018, a company incorporated in British Columbia (the “Registered Owner”) acquired title to a residential property (the “Property”) for $30,000,000 in the Metro Vancouver Regional District (the “Transaction”) and held such title as bare trustee for another company incorporated in British Columbia (the “Beneficial Owner”).  The Registered Owner and the Beneficial Owner were solely owned by another British Columbia company (the “BC Shareholder”).  The shares of the BC Shareholder were solely owned by a company incorporated in the People’s Republic of China (the “PRC Shareholder”).  The shares of the PRC Shareholder were entirely held by two individuals with permanent resident status in Canada (the majority shareholder of the PRC Shareholder will be referred to as “the Ultimate Shareholder” in this blog post).

The Registered Owner and the Beneficial Owner paid property transfer tax on the Transaction, but did not pay additional property transfer tax (“Additional PTT”) that is imposed on what the B.C. Property Transfer Tax Act  (the “PTT Act”) calls “foreign entities” (being a person who is neither a Canadian citizen nor a Canadian permanent resident, nor a foreign corporation) and “taxable trustees” (meaning a trustee of a trust in which either a trustee is a foreign entity or a beneficiary who is a foreign entity holds a beneficial interest in the residential property held by the trust) for certain areas in B.C. including the Metro Vancouver Regional District. 

In December of 2020, the B.C. Ministry of Finance (the “Minister”) assessed that the Transaction was subject to Additional PTT in the amount of $6,000,000.  The Registered Owner appealed this assessment.  In September of 2022, the Minister responded that the assessment was appropriately made, as the Registered Owner was both a “foreign corporation” and a “taxable trustee” in the Transaction.

By way of background, the definition of a “foreign corporation” under the PTT Act includes a corporation that is incorporated in Canada and is controlled by a corporation that is not incorporated in Canada. The PTT Act defines the term “control” as direct or indirect control within the meaning of Section 256 of the Canadian federal Income Tax Act.

The Minister found that the Registered Owner was simultaneously controlled by the PRC Shareholder (a foreign corporation), the BC Shareholder (which fit under the definition of “foreign corporation” under the PTT Act because it was controlled by a foreign corporation, i.e. the PRC Shareholder), and the Ultimate Shareholder within the meaning of Section 256(6.1) of the Income Tax Act.  The Minister concluded that the Registered Owner was consequently controlled directly or indirectly within the meaning of Section 256 of the Income Tax Act by a foreign corporation, and therefore fit within the definition of a “foreign corporation” under the PTT Act.

Subsequently, the Registered Owner appealed the Minister’s decision to the British Columbia Supreme Court.

The Registered Owner argued that it was not a “foreign corporation” under the PTT Act because it was ultimately controlled by the Ultimate Shareholder, a permanent resident of Canada.  The Registered Owner relied on past case law which stated that “control” under Section 256(5.1) of the Income Tax Act should be interpreted to mean that there could only be one person or entity that holds ultimate control of a taxpayer.

The Minister submitted that “controlled” under the PTT Act did not depend on ultimate control by one person or entity, and that the Registered Owner was simultaneously controlled by the PRC Shareholder, the BC Shareholder, and the Ultimate Shareholder, because the Canadian Parliament enacted new sections (Section 256(6.1) [simultaneous control] and (6.2) [application to control in fact]) of the Income Tax Act to allow for simultaneous control by different parties at the same time. 

The court agreed with the Minister and the Registered Owner’s appeal was dismissed. The court concluded that while the Additional PTT was avoidable from the Ultimate Shareholder’s perspective (i.e. the Ultimate Shareholder could have chosen to simply not involve the PRC Shareholder in the ownership structure of the Property), the assessment for Additional PTT is a consequence of how the Ultimate Shareholder and his companies have chosen to structure their affairs.