Executive Summary: Key Legal and Evidentiary Issues

• Whether 1164708 B.C. Ltd. qualified as a “taxable trustee” under the Property Transfer Tax Act due to indirect foreign control.

• Application of section 256(1) of the federal Income Tax Act to determine “control in any manner whatever.”

• Interpretation of provincial legislation incorporating federal tax law definitions and control tests.

• Consideration of discretionary trust arrangements in establishing indirect control by a foreign beneficiary.

• Assessment of whether the trial judge erred in law in interpreting and applying the ATT provisions.

• Determination of whether the ATT was properly assessed on the basis of statutory interpretation and corporate structure.

Background and transaction

1164708 B.C. Ltd. was incorporated for the sole purpose of acquiring a 44-unit residential property in Vancouver for $30 million. The property transfer was registered in July 2018. At registration, the company indicated that it was not a foreign entity or a taxable trustee and therefore did not pay the Additional Property Transfer Tax (ATT).

Nearly two years later, the Minister of Finance reassessed the transaction, concluding that the company was in fact a “taxable trustee” under section 1(1) of the Property Transfer Tax Act (PTTA). The reassessment imposed ATT of over $3 million, claiming that the company was held in trust for a foreign beneficiary, thereby falling within the statutory definition of a taxable trustee.

The company appealed to the British Columbia Supreme Court, which dismissed the appeal and upheld the reassessment. The matter then proceeded to the British Columbia Court of Appeal.

Court of Appeal’s reasoning

The core issue was whether the appellant corporation was a taxable trustee at the time of registration. The ATT applies when a trustee of a foreign trust acquires property, where the beneficiary is a foreign entity, and control as defined under section 256(1) of the federal Income Tax Act (ITA) exists.

The appellant argued that:

• The trust was discretionary, and the foreign beneficiary had no control over the corporation.

• There was no de facto or legal control exercised “in any manner whatever.”

• Therefore, the corporation should not be treated as controlled by a foreign entity, nor as a taxable trustee.

The Court rejected these arguments. Justice Grauer emphasized that:

• Section 256(1) provides a broad and inclusive definition of “control,” including indirect control in any manner whatever.

• The Property Transfer Tax Regulation incorporates section 256(1) by reference, showing the legislature’s intent to capture not only direct control but also discretionary and indirect forms of influence.

• Even if a beneficiary of a discretionary trust does not have enforceable rights over the trustee, the structure and purpose of the arrangement can still amount to control as contemplated by the statute.

Justice Grauer further noted that the trust’s discretionary nature did not insulate the transaction from ATT liability, especially given that the corporate and trust arrangements were deliberately structured to hold land on behalf of foreign interests.

Outcome

The British Columbia Court of Appeal unanimously dismissed the appeal. It upheld the trial judge’s conclusion that 1164708 B.C. Ltd. was a taxable trustee at the time of the transaction and that the ATT assessment was valid.

The Court found no error in the trial judge’s interpretation of the statute, and confirmed that the Minister of Finance acted within lawful authority in reassessing the property transfer. The appeal was therefore rejected, and the ATT liability of more than $3 million remained in place. Costs were not specifically addressed in the reasons.