Simon's Megalomaniacal Legal Resources

Ontario Tax - Land Transfer Tax Act (LTTA)

. Yavari v. Ontario (Minister of Finance)

In Yavari v. Ontario (Minister of Finance) (Div Court, 2024) the Divisional Court allowed a JR, here challenging "a decision of the Minister of Finance of Ontario (“the Minister”) under section 20 of the Land Transfer Tax Act, R.S.O. 1990, c. L.6 (“LTTA”) to deny the applicant relief from payment of the Non-Resident Speculation Tax (“NRST”)".

Here the court sets out the procedures applied in this rare LTTA 'non-resident speculation' tax case:

[1] The applicant seeks judicial review of a decision of the Minister of Finance of Ontario (“the Minister”) under section 20 of the Land Transfer Tax Act, R.S.O. 1990, c. L.6 (“LTTA”) to deny the applicant relief from payment of the Non-Resident Speculation Tax (“NRST”). Section 20 gives the Minister discretion if, due to special circumstances it is deemed inequitable to demand payment of the whole amount. ...

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[5] For the reasons set out below, I would find the decision unreasonable and I would quash the Minister’s decision. In summary, not to consider the Pandemic as special circumstances explaining a 10-day delay is a failure to engage with s. 20. By concluding that the effect of the delays in her language and medical testing was that she “waited longer than she anticipated to obtain permanent resident status” the decision ignored the special circumstances central to the applicant’s request for relief, namely the cause of the delays due to COVID-19.

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[7] The applicant purchased a home in Toronto in 2017 when she was a visitor in Canada and paid NRST at the rate of 15 per cent of the purchase price under s. 2(2.1) of the LTTA in the amount of $510,000. The applicant lived in the home, after its purchase, went to school in Ontario, obtained 2 certificates from George Brown College and then obtained employment. Upon obtaining a work permit, she became eligible to begin the process to obtain permanent resident status in Canada.

[8] O. Reg.182/17 sets out certain conditions under which taxpayers who paid NRST may have it rebated. The conditions under s. 5 include the requirement that the foreign national taxpayer be the only transferee named in the conveyance (other than a spouse), have occupied the home as principal residence from within 60 days of the purchase to the date of application, become a permanent resident of Canada within four years after the property was purchased and applied for the rebate before the 181st day after becoming a permanent resident.

[9] The applicant was granted permanent resident status in Canada on September 3, 2021, being 4 years and 10 days after the purchase of the property. On December 8, 2021 the applicant applied for a rebate under s. 5 of the LTTA. The applicant submitted that the COVID-19 pandemic impacted the federal government’s processing of permanent resident applications. The language testing appointment and medical test required for the applicant to obtain permanent residency were delayed by 5 months and 2 months respectively due to the COVID-19 pandemic.

[10] The Minister disallowed the application on May 3, 2022 on the basis that the applicant had not satisfied the statutory requirement of becoming a permanent resident of Canada within four years after the day the property was purchased. But for the 10 days beyond the four year requirement, she met the other requirements of s. 5 to qualify for the rebate.

[11] The applicant submitted a notice of objection under s. 13 of the LTTA on October 21, 2022. The Minister confirmed the statement of disallowance on February 23, 2023. The applicant did not file an appeal from the notice of objection.

[12] The applicant then applied for relief under s. 20 of the LTTA where the Minister has the discretion to accept such amount as he or she deems proper if, owing to special circumstances, it is deemed inequitable to demand payment of the whole amount imposed by the LTTA. The Minister sought further information from the applicant which the applicant provided. On November 10, 2023, the Minister sent a letter disallowing the application, giving the following reasons:

The main purpose of section 20 is to provide some administrative flexibility for granting relief in cases where, owing to special circumstances, the requirement to pay the full statutory amount would be demonstrably inequitable.

Relief pursuant to section 20 is rarely granted, and where it is granted, the circumstances are truly exceptional.

Your response has been carefully reviewed, and while the circumstances described in your correspondence are regrettable, your request for relief has been denied.

The Information Note

[13] The applicant’s tax file included an Information Note prepared in the course of considering the applicant’s s. 20 claim which the Minister relies on in addition to the November 10, 2023 letter as support for its decision. The recommendation was to deny the applicant’s request for relief. The Discussion and Analysis in the Information Note state: ....

[14] There is no provision for internal review or statutory appeal of the Minister’s decision not to exercise his discretion under s. 20 of the LTTA.

[15] The Minister asserts that the court should decline to hear this application, as the LTTA provides an alternative remedy which the applicant has not exhausted. Alternatively, the Minister submits that their decision was reasonable in light of the broad discretion granted under s. 20 of the LTTA.

Statutory Background

Land Transfer Tax Act, R.S.O. 1990, c. L.6

Interpretation

1 (1) In this Act,

[...]

“foreign entity” means a foreign corporation or a foreign national; (“entité étrangère”)

“foreign national” means an individual who is a foreign national as defined in subsection 2 (1) of the Immigration and Refugee Protection Act (Canada); (“étranger”)

Additional tax on foreign entities and taxable trustees

(2.1) In addition to any tax payable under subsection (1), and subject to section 2.1, every person who, on or after April 21, 2017, tenders for registration in Ontario a conveyance by which any designated land that is located within the specified region is conveyed to a foreign entity or a taxable trustee shall pay, when the conveyance is tendered for registration or before it is tendered for registration, a tax,

(a) computed at the rate of 15 per cent of the value of the consideration for the conveyance; or

(b) if an alternate rate of tax is prescribed by the Minister for the purposes of this subsection, computed by multiplying the prescribed alternate rate by the value of the consideration for the conveyance. 2017, c. 17, Sched. 1, s. 2.

Disallowance of refund

(7) Where a person has, in accordance with this Act and the regulations, applied for a refund or rebate under this Act or the regulations and the person’s claim is in whole or in part refused, the Minister shall cause to be delivered to such person a statement of disallowance in such form as the Minister shall require, and the statement shall specify the amount of the disallowance and the reasons therefor. R.S.O. 1990, c. L.6, s. 8 (7); 1997, c. 19, s. 12 (2); 2017, c. 34, Sched. 23, s. 3.

Notice of objection

13 (1) A person that objects to an assessment made under section 12 or a statement of disallowance made under subsection 8 (7) may, within 180 days from the day of mailing or delivery by personal service of the notice of assessment or statement of disallowance, serve on the Minister a notice of objection in the form approved by the Minister. 1997, c. 43, Sched. F, s. 6 (4).

Facts and reasons to be given

(1.1) The notice of objection shall,

(a) clearly describe each issue raised by way of objection; and

(b) fully set out the facts and reasons relied on by the person in respect of each issue. 1997, c. 43, Sched. F, s. 6 (4).

Reconsideration

(3) Upon receipt of a notice of objection, the Minister shall with all due despatch reconsider the assessment or statement of disallowance and vacate, confirm or vary the assessment or statement of disallowance or reassess or serve a fresh statement of disallowance and the Minister shall thereupon notify the person who has made the objection of his or her action in writing. R.S.O. 1990, c. L.6, s. 13 (3); 1997, c. 43, Sched. F, s. 6 (6).

Appeal

14 (1) After the Minister has given the notification required by subsection 13 (3), a person who has served notice of objection under section 13 may appeal to the Superior Court of Justice to have the assessment or the statement of disallowance vacated or varied or reassessed or a fresh statement of disallowance issued, but no appeal under this section shall be instituted after the expiration of ninety days from the day on which notice has been mailed to such person under subsection 13 (3). R.S.O. 1990, c. L.6, s. 14 (1); 2001, c. 23, s. 145 (1).

Appeal, how instituted

(2) An appeal to the Superior Court of Justice shall be instituted by,

(a) filing a notice of appeal with the court in the form approved by the Minister;

(b) paying a fee to the court in the same amount and manner as the fee payable under regulations made under the Administration of Justice Act on the issue of a statement of claim; and

(c) serving on the Minister a copy of the notice of appeal as filed. 1997, c. 43, Sched. F, s. 6 (8); 2001, c. 23, s. 145 (2).

Reply to notice of appeal

(5) The Minister shall with all due dispatch serve on the appellant and file with the Superior Court of Justice a reply to the notice of appeal admitting or denying the facts alleged and containing a statement of such allegations of fact and of such statutory provisions and reasons as the Minister intends to rely on, and where the Minister fails to serve the reply within 180 days from the date of service upon the Minister of the notice under subsection (2), the appellant may, upon twenty-one days notice to the Minister, apply to a judge of the Superior Court of Justice for an order requiring the reply to be served within such time as the judge shall order, and the judge may, if the judge considers it proper in the circumstances, also order that, upon the failure of the Minister to serve the reply in the time specified by the order, the assessment or statement of disallowance with respect to which the appeal is taken shall be vacated and any tax paid pursuant to such assessment, or any refund disallowed pursuant to such statement of disallowance, shall be repaid or refunded to the appellant, but nothing in this section revives an appeal that is void or affects a statement of disallowance or assessment that has become valid and binding. R.S.O. 1990, c. L.6, s. 14 (5); 1999, c. 9, s. 135; 2001, c. 23, s. 145 (3).

Matter deemed action

(6) Upon the filing in the Superior Court of Justice of the material referred to in subsection (5), the matter shall be deemed to be an action in the court, and the practice and procedure of the court, including the right of appeal and the practice and procedure relating to appeals, apply to every matter that is deemed to be an action under this subsection, and every judgment and order given or made in every such action may be enforced in the same manner and by the like process as a judgment or order given or made in an action commenced in the court. R.S.O. 1990, c. L.6, s. 14 (6); 2001, c. 23, s. 145 (4).

Disposition of appeal

(7) The court may dispose of an appeal by allowing it, by dismissing it, or by allowing it in part and directing the Minister to vacate, vary or reconsider the assessment or statement of disallowance and reassess or issue a fresh statement of disallowance as indicated by the judgment of the court. R.S.O. 1990, c. L.6, s. 14 (7).

Idem

(8) In delivering judgment disposing of an appeal, the court may order payment or refund of an amount by the appellant or by the Minister, as the case may be, and may make such order as to costs as is considered proper. R.S.O. 1990, c. L.6, s. 14 (8); 1994, c. 18, s. 4 (5); 2004, c. 31, Sched. 21, s. 19.

Resolving disputes

20 If any doubt or dispute arises as to the liability to pay a tax or any portion of a tax demanded under the authority of this Act, or if owing to special circumstances it is deemed inequitable to demand payment of the whole amount imposed by this Act, the Minister may accept such amount as he or she deems proper. R.S.O. 1990, c. L.6, s. 20.

O. Reg. 182/17: Tax Payable Under Subsection 2(2.1) of The Act by Foreign Entities and Taxable Trustees

Rebate for foreign nationals who become permanent residents of Canada

5. (1) Subject to section 7.1.1, the Minister may rebate tax paid by a foreign national under subsection 2 (2.1) of the Act in respect of a conveyance of land if the Minister is satisfied that,

(a) the foreign national is the only transferee named in the conveyance or, if two transferees are named, they are the foreign national and the foreign national’s spouse;

(b) the foreign national became a permanent resident of Canada within four years after the day the conveyance was tendered for registration; and

(c) on and after a date that is within 60 days after the day the conveyance was tendered for registration, and continuing until the date on which an application under subsection (2) is made, the land has been occupied by the transferee or transferees as their principal residence. O. Reg. 182/17, s. 5 (1); O. Reg. 144/24, s. 7 (1, 2).

(1.1) In the case of a conveyance of designated land that consists solely of land described in section 1.1.1, clause (1) (c) does not apply. Instead, the Minister must be satisfied that the land has been used by the transferee or transferees in connection with their principal residence located in the same condominium complex as the land described in section 1.1.1 beginning within 60 days after the day the conveyance was tendered for registration and continuing until the date on which the application for a rebate under subsection (2) is made. O. Reg. 144/24, s. 7 (3).

(2) An application for a rebate under this section shall be made before the 181st day after the foreign national or the foreign national’s spouse became a permanent resident of Canada, but no application shall be made later than four years and 180 days after the day the tax became payable. O. Reg. 182/17, s. 5 (2); O. Reg. 144/24, s. 7 (4).

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[23] The LTTA gives the Minister broad discretion to decide whether taxpayer relief should or should not be granted. There are no statutory parameters limiting what “special circumstances” might warrant the Minister “deeming” the payment of tax to be “inequitable.”

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[27] The test for s. 20 (“if owing to special circumstances it is deemed inequitable to demand payment of the full statutory amount”) is set out correctly in the Information Note.

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[32] The Information Note stated that the Ministry applied an administrative concession during the two states of emergency that were in place during COVID-19:

1) to extend the occupancy requirement for a NRST rebate (the requirement in s. 5(1)(c)of the LTTA); and

2) to extend the time limit for filing an application for rebate (the requirement in s. 5(2) of the LTTA).

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[37] The analysis in the Information Note states that the statutory conditions for rebates must be met in their entirety and the applicant did not meet the deadline for obtaining permanent residency. The Minister argues that to agree with the applicant that there is no reasonable way of concluding that the imposition of a tax of $510,000 is not inequitable would essentially be to say that there is a specific exception to the rebate requirement in s. 5(1)(b) accessible through s. 20 when s. 20 says nothing of the kind. The inference that arises is that the applicant was denied relief under s. 20 because it was considered to be contrary to the statutory scheme of the legislation to grant the relief.

[38] Section 20 is part of the statutory scheme as well as the 4 year limitation period for obtaining permanent residency and requesting a rebate in s. 5. There is nothing in s. 20 that excludes taxpayers who have not met the statutory 4 year requirement.

[39] The purpose of s. 20 is to consider whether special circumstances of an applicant make demanding payment of the statutory amounts inequitable. Every case will depend on its individual circumstances. However, the fact that the COVID-19 pandemic may have affected other NRST taxpayers fails to consider how the global outbreak of Coronavirus affected the applicant.

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[44] NRST aims to curb speculative activity by foreign buyers that can artificially drive up housing prices, particularly by discouraging non-resident foreign entities from purchasing property who do not intend to live in the property or where the purchase is purely for speculative motives. In this case, there is no issue that the applicant is not a speculator and intended to and did live in the property she purchased. She resided in the home within 60 days of its purchase, attended school once she obtained her student visa, and then worked as an employed person and followed the path of temporary resident to permanent resident once she obtained her work permit. The Information Note acknowledged that she would have qualified for the NSRT rebate but for her inability to meet the 4 year deadline. By not considering these circumstances, the Minister did not consider the applicant’s particular circumstances.