Immigration lawyer notes owners often obscure identities to avoid Canadian taxes
Douglas Todd
The Vancouver Sun
The phenomenal popularity of Canada’s new 10-year visas is a key factor behind the latest housing booms in Vancouver and Toronto, say immigration specialists.
“I often travel to China, where I see the great pride many take in investing their money in Canada” — particularly by taking advantage of 10-year visas to buy real estate, said George Lee, a Burnaby immigration lawyer.
In 2015, Canadian immigration officials issued 390,000 10-year, multiple-entry visas to residents of Mainland China, the largest cohort, with another 162,000 going to people from India.
The former Conservative government began offering the 10-year visas in February 2014. As a result, in that first year, the number of travel visas handed to Chinese nationals tripled to 337,000.
Lee says the visas, which allow people to travel freely to Canada each year and stay for at least six months at a time, have sparked an explosion in foreign travel and property speculation in Canada, particularly from China.
The multiple-entry visas have caused a migration “chain reaction,” Lee said, which often leads to international students becoming proxies for offshore real-estate investors.
“A multiple entry visa creates multiple effects,” said Lee.
“It’s one stone that kills many birds. And it impacts the real-estate market. The main purpose for a lot of this (interest in 10-year-visas) is to get a piece of Vancouver.”
In addition to providing foreign nationals with a way to enter Canada’s property market, Lee said multiple-entry visas pave the way for would-be immigrants to visit their offspring in Canada, many of whom are foreign students who work and eventually apply for permanent resident status.
Vancouver immigration lawyer Sam Hyman joins Lee in maintaining the 10-year visas have some advantages, such as increasing tourism.
The visas, Lee said, are a key reason that Canada this year jumped from 17th to third most popular destination for Mainland Chinese tourists (of which there were 122 million last year).
But the immigration lawyers agreed a downside of the popularity of 10-year visas is drastically inflated housing prices in Canada’s major cities.
The multiple-entry visas, said Hyman and Lee, have helped make Canada the world’s second most desired country for multimillionaire Mainland Chinese, according to the Hurun Report.
Metro Vancouver is the fifth most popular city in the world for wealthy Chinese investors, while Toronto is eighth.
Ten-year visas, in addition, provide greater opportunities for increased tax avoidance and evasion, which Hyman and other immigration specialists say is an ongoing problem in Canada’s real-estate industry, especially in B.C.
Hyman is particularly concerned about how a diverse range of real-estate speculators in B.C. use various means to obscure the legal ownership of property.
A multiple-entry visa offers “many people exactly what they want,” said Hyman.
“They want to be seen as tourists. They want to be off the radar of the Canada Revenue Agency,” including by being able to claim they’re not residents of Canada for income tax purposes.
The multiple-entry visa gives wealthy foreign nationals increasing opportunities to use their low-income-earning offspring and others as proxies, sometimes called “nominees,” to buy Canadian property on their behalf, according to Lee and Hyman.
Many wealthy foreign nationals employ their international-student children as channels for investing in real estate, they say, noting there are 130,000 foreign students in B.C., 51,000 of whom are from Mainland China.
“Some people are transferring their wealth to their dependents and then relinquishing their permanent resident status in Canada. They’re applying instead for 10-year visitors’ visas,” Hyman said.
He is particularly aware of foreign nationals, as well as domestic Canadians, using “bare trusts” and other loopholes to purchase properties and avoid paying taxes in B.C.
His worries echo a Transparency International report that says stronger tax enforcement is desperately needed in Canada and especially for Metro Vancouver, where governments can’t identify the owners of almost half the region’s 100 most valuable homes.
“B.C. is losing tens of billions of dollars in unpaid taxes related to property,” said Hyman.
Too many dubious ways exist — the immigration lawyer said — for real estate investors to obscure their identities and avoid paying Canadian income taxes, B.C.’s 15-per cent foreign buyers tax, B.C.’s property transfer tax or capital gains tax on real-estate profits.
To combat exploitation of Metro Vancouver’s housing market, Hyman said, one of the first things the new NDP government of B.C. should do is close the bare-trust loophole for owning properties.
Former B.C. Liberal finance minister Mike de Jong promised in 2016 to get rid of the loophole, said Hymen, but he reneged.
The Ontario government is far ahead of B.C. on this regulation, Hyman said. It closed the loophole in 1983.
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