The BC Court of Appeal confirms that additional property transfer tax (ATT) applies to foreign entities, even when using trust or agency arrangements. Legal title matters more than beneficial ownership.
Introduction
A recent British Columbia Court of Appeal case, British Columbia v. 1084204 B.C. Ltd., 2025 BCCA 110, has reaffirmed the liability for additional transfer tax ("ATT") under the Property Transfer Tax Act, RSBC 1996, c. 378 (the "PTT Act") in agency and trustee situations concerning property.
Ultimately, the PTT Act requires that foreign entities (whether individuals or bodies corporate) acquiring legal title on behalf of Canadian principals must pay the ATT if it can be shown that said foreign entities were the "transferee" of a property transaction.
Background Facts and Procedural History
The Underlying Transaction
The respondent, 1084204 B.C. Ltd. ("108"), was incorporated in British Columbia, but was controlled by a foreign national, who was the sole shareholder, officer, and director of the company (the "Principal"). This therefore made 108 a "foreign entity" under section 2.01 of thePTT Act, subject to ATT when purchasing property in British Columbia.
In May of 2019, 108 purchased a property in Saanich, British Columbia (the "Property") pursuant to a standard form Contract of Purchase and Sale (the "Contract"). Critically, 108 was listed as the transferee on the Contract, the Form A Freehold Transfer Form, and the Property Transfer Tax Return, and was the registered owner of the Property in the Land Title Office registry. On the Property Transfer Tax Return, 108 specified that the Property was purchased by 108 to be held in trust for Yi Sui, a permanent resident of Canada and the common law spouse of the Principal.
The Initial Appeal
Later in 2019, the legislated minister pursuant to the PTT Act sent 108 a Notice of Assessment indicating that 108, as a foreign entity, owed ATT on the purchase of the Property, as 108 was a "taxable trustee". 108 subsequently appealed this Notice of Assessment, relying on a Declaration of Bare Trust and Agency Agreement (the "Trust Agreement"), which was signed by each of the Principal and Yi Sui, and which stated that 108 was holding title to the Property as "nominee, agent, and bare trustee" for Yi Sui. This first appeal was unsuccessful, and 108 appealed further at the Supreme Court of British Columbia.
The Appeal at the Supreme Court of British Columbia
In a 2023 decision at the Supreme Court of British Columbia1 the chambers judge reversed the Notice of Assessment, holding that the Trust Agreement meant that the Property could not be considered to have been purchased by a foreign entity. Instead, the Supreme Court found that the Trust Agreement did not create a trust, but rather created an agency relationship. The court therefore ruled that 108 having purchased the Property as an agent for Yi Sui meant that the transaction would not attract ATT.
The Province then appealed the decision, giving rise to the present case.
Legislative Background
Under the PTT Act, ATT applies to transactions where the transferee is a "foreign entity", a "taxable trustee", or both. Definitions for these terms are as follows:
"foreign entity" means a foreign national or a foreign corporation;
"foreign national" means an individual who is a foreign national as defined in section 2 (1) of the Immigration and Refugee Protection Act (Canada);
"foreign corporation" means a corporation that is one of the following:
(a) a corporation that is not incorporated in Canada;
(b) unless the shares of the corporation are listed on a Canadian stock exchange, a corporation that is incorporated in Canada and is controlled by one or more of the following:
(i) a foreign national;
(ii) a corporation that is not incorporated in Canada;
(iii) a corporation that would, if each share of the corporation's capital stock that is owned by a foreign national or by a corporation described in paragraph (a) of this definition were owned by a particular person, be controlled by the particular person;
"taxable trustee", in relation to a taxable transaction, means a trustee of a trust in respect of which
(a) any trustee is a foreign entity, or
(b) no trustee is a foreign entity but, immediately after the registration of the taxable transaction, a beneficiary of the trust who is a foreign entity holds a beneficial interest in the residential property to which that taxable transaction relates[.]2
On the face of the legislation, it is clear that if the Principal were held by the court to be the transferee of the Property, then ATT would apply. However, the Principal's argument, accepted by the Supreme Court of British Columbia, was that the Trust Agreement made the Principal a mere agent for Yi Sui, and not a transferee.
The British Columbia Court of Appeal's Findings
The British Columbia Court of Appeal rejected the Principal's argument, overturning the decision of the Supreme Court of British Columbia and restoring the ATT assessment.
The Court of Appeal held that, "subject to statutory exemptions, property transfer tax is payable by the person to whom the legal estate is transferred (the 'transferee'), regardless of whether another person has beneficial ownership."3 That is to say, regardless of the legal relationship between the Principal and Yi Sui by operation of the Trust Agreement, 108 was the transferee in the transaction concerning the Property. Since 108 was clearly a foreign entity, the ATT necessarily must apply, regardless of any equities that could be claimed by one of the parties claiming to be an agent of the other.
This finding that 108, and not Yi Sui, was the transferee was strengthened by the fact that 108, not the Principal or Yi Sui, acknowledged in the property transfer tax return it prepared as transferee that it owed general property transfer tax. The court simply concluded on this point that, "[regardless] of whether 108's relationship with Ms. Sui could be characterized as an agency or a trust, or both, 108's liability to pay the ATT arose on the registration of the transfer of the legal estate to 108."4
The matter of whether 108 was a "taxable trustee" under the PTT Act was not addressed by the Court of Appeal, as the matter had been fully decided and would be reversed on the foregoing agency grounds. Nonetheless, the Court of Appeal did state that there was "considerable substance to the Province's arguments" that "(1) [a] relationship in which an agent holds legal title for a principal cannot also be a trust relationship, and (2) that bare trusts should be ignored for the purpose of the PTT Act provisions in issue."5
Finally, the Court of Appeal rejected 108's attempt to be granted leave to raise an issue concerning the constitutionality of the relevant provisions of thePTT Actin this case. The original assessment of ATT under thePTT Actagainst 108 was restored.
Conclusion and Takeaways
This decision confirms that the PTT Act is to be strictly interpreted when assessing whether ATT applies to a real property transaction on the basis of the purchaser being a foreign entity. If a transferee is a foreign entity, supplementary agency and trust agreements cannot be used to avoid paying ATT.
Footnotes
1. 1084204 B.C. Ltd. v His Majesty The King In Right Of British Columbia, 2023 BCSC 2013.
2. Property Transfer Tax Act, RSBC 1996, c. 378. Section 2.01.
3. British Columbia v. 1084204 B.C. Ltd., 2025 BCCA 110. At para. 46.
4. Ibid. At para. 50.
5. Ibid. At para. 51.
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