A recent court case involving rich Chinese families in British Columbia revealed the lengths some wealthy immigrants go to scam Canadian immigration authorities.
It shows how wealthy foreigners are trying the exploit the immigration system to run tax and real estate scams and reap significant financial reward.
Such activity has a direct impact on Canadian citizens and permanent residents by depriving the public purse of tax dollars and driving up real estate prices. Building immigration fraud cases costs millions in time and resources, with complicated cross-agency investigations required to piece together the facts.
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The civil case in the BC Supreme Court involved a dispute between two Chinese families over three houses worth millions of dollars. That the Fu and Zhu families were prepared to expose their immigration, real estate and tax fraud as part of the case has left experts bemused and calling for a thorough investigation.
The two families reached Canada through the investment streams of provincial nominee programs in Manitoba and Prince Edward Island. Both streams previously featured the payment of a deposit that is returned when the candidate has successfully set up a business. However, wealthy applicants are often happy to forego the deposit and use the programs as a back door to Canadian permanent residence. Once PR is secured, they move elsewhere, in this case to invest in real estate in west Vancouver.
P.E.I. Business Stream Exploited
The Prince Edward Island 100% Ownership Stream is facing scrutiny because of how it is being exploited. The province announced in November 2017 that it withheld $18 million in 2016 from business candidates who did not meet the requirements for deposits to be repaid. P.E.I. has also said it will move to an expression of interest format in 2018, although it is not clear if the terms of the program will significantly change.
Meanwhile, Manitoba has overhauled its investment stream for 2018 as a result of exploitation. Like many Canadian provinces, it has moved to a two-step process, where entrepreneurs come to Canada on a temporary work permit and are issued permanent residence once their businesses are established.
For both the Fu and Zhu families, the programs in less sought-after provinces were ripe for exploitation.
They represented a starting point for a litany of further fraud that included:
- Pretending to spend time in Canada to meet physical presence requirements to maintain PR status.
- Avoid income tax by not declaring worldwide income.
- Falsifying home ownership to avoid pay capital gains tax.
- Using employees of family businesses to move cash lump sums out of China.
- Employing a real estate agent who provided false employment details and salary payments to show time spent in Canada.
- Tying the complicated cases up in court, at a direct cost to the Canadian tax payer.
Canada’s Provincial Business Streams
Canada’s provinces are moving away from a direct path to Canada for wealthy immigrants and instead, turning to two-step immigration programs aimed at entrepreneurs looking to establish businesses and be granted Canadian permanent residence.
Increasingly, provincial entrepreneur programs require candidates to spend up to two years in Canada on a conditional temporary work permit, before being issued a nomination for permanent residence.
The latest province to switch to the two-step format is Manitoba, following the introduction of a new Business Investor Stream which began operation at the start of 2018. The new stream replaces the one-step MPNP-Business stream, which required a deposit refundable once the candidate’s business was satisfactorily established.
Manitoba joins British Columbia, Ontario, Saskatchewan and Nova Scotia in changing to a two-step process.
Prince Edward Island and New Brunswick both still operate one-step entrepreneur programs, while Alberta’s Self-Employed Farmer Stream is directed specifically at agriculture specialists. Newfoundland & Labrador does not operate a business category of any description. P.E.I. recently introduced an expression of interest system.
Meanwhile, the popular Quebec Immigrant Investor Program remains the only outright passive investment program offering a direct route to Canadian permanent residence. However, it is expected the province will table new legislation in the Spring 2018 featuring a work permit based entrepreneur program to complement its highly successful QIIP investor program.