Foreign investors avoid taxes by buying real estate in Canada - The Globe and Mail

Foreign investors avoid taxes by buying real estate in Canada - The Globe and Mail: "The Globe discovered one in three multimillion-dollar homes bought recently in Vancouver areas popular with foreign buyers is registered to a homemaker, student or corporation – one indicator of how the identity of the person who actually paid can be hidden.

When a spouse or child sells a property that is registered in their name, the real investor can avoid capital gains taxes – because the relative in Canada can claim it was their primary residence, therefore not an investment.

Other revealing data came from Statistics Canada, which tracks income that households report to the CRA.

In the Vancouver area of Dunbar, which realtors said is a top neighbourhood for Chinese clients, one in four of what Statscan calls “couple families” – excluding seniors – declared income of less than $35,000 in 2013. That puts them in the lowest tax bracket.

Given that the municipal property taxes on a $2-million to $3-million home are about $10,000, those reported income levels are questionable.

Land titles records on 250 houses bought in the past two years for more than $2-million in key Vancouver neighbourhoods indicate that 85 per cent of those new owners have Chinese names. There is no way to tell how many are Canadian. However, 2014 statistics from Macdonald Realty and ReMax show that 70 per cent of their clients were from mainland China.

The records list the occupations of non-corporate owners. The most frequent is “business person.” The next is “homemaker,” then “student.”

“When you sift through the information, you find that the wife [or student] has no income … there is no possible way they could afford to purchase the home,” Mr. Chodikoff said.

Several of the houses visited by The Globe appear to be unoccupied, with cobwebs at the front entrance and mail piled up.

One of the few owners who answered the door was a 25-year-old University of British Columbia science major who did not want to be identified. “My parents bought the house – for me to study here,” she said.

She is the registered owner of the $2-million home – but she said her parents live there too when they are not in China on business. “After I study, they will sell again.”

One of the more expensive homes bought last year – in Point Grey – is registered to a student who is not living there. It was bought for $4.8-million and has a stunning view of the mountains. It changed ownership three times in five years and is now empty.

The Globe found five out of 13 properties owned by students are empty and four are rented out, suggesting they were bought as investments.

A family friend picking up the mail at one house said the real owner is a business person in China who will not be in Canada for months. At another empty student-owned home, the backyard pool is filled with dirty water and garbage.

Many of the properties registered to homemakers are occupied. Several family members at those homes indicated the heads of the households are transferring wealth to Canada – because it is seen as a small, clean, inexpensive haven.

A homemaker listed as the owner of a $3.5-million house bought this year said her husband chose it “because it was good for our daughter’s [public] school to be nearby.”

She said she is staying in Vancouver – primarily so their children can get a Canadian education – while her husband travels back and forth.

She said the couple has permanent resident status in Canada, which benefits the family, but her husband earns good money in China from his food trading business.

A key question is whether foreign ownership actually is inflating the market while locals whose income tax dollars pay for roads and hospitals are squeezed out. If so, Canada would be losing affordable housing as well as much-needed provincial and federal tax revenue.

The data examined by The Globe suggest the foreign buyers have a significant, disproportionate impact on home prices."



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