When we have tax consultations with individuals who are either permanently transferred or being sent on an extended assignment into Canada, one of the most frequent questions that we receive is, “Can I purchase a home in Canada?” The answer isn’t straightforward.
Over the last number of years, the increased activity of foreign investors entering and winning bids on home purchases in competitive markets have been a cause for concern for the government and the Canadian public. Consequently, the Canadian government took action and introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), which came into force on January 1, 2023. The Act sought to ban non-Canadians from purchasing property in Canada for two years and was set to expire on January 1, 2025. However, earlier this year, the government announced that the Act would be extended and remain in effect an additional two years (until January 1, 2027).
While this Act had multiple goals including allowing for greater opportunities and addressing housing issues for Canadians, it has also had unintended consequences. This is significant in the global mobility world as expats are finding they cannot purchase a home in Canada once they transfer/relocate/move here.
Definition of “Non-Canadian”
The Act specifically defines non-Canadians as being unable to purchase a home in Canada. A “non-Canadian” is defined in the Act as:
A person who is not a Canadian citizen, a permanent resident, or a person registered as Indian under the Indian Act;
A foreign corporation (i.e. a corporation that is not incorporated under provincial or federal law);
A Canadian corporation whose shares are not listed on a Canadian stock exchange and is controlled (i.e. at least 10% directly or indirectly owned via equity value or voting rights) by a non-Canadian person; or
A prescribed person or entity (effectively, a non-Canadian individual or business)
Residential Property affected by the Act
The Act defines “residential property” as any real property or immovable (other than a prescribed real property or immovable), situated in Canada and is basically:
A detached house; or,
A part of a building, e.g. a semi-detached house, townhouse, condominium
All residential properties located in cities and towns with a core population of 10,000 or more are included in this ban – specifically Census Metropolitan Areas (“CMAs”) and Census Agglomerations (“CAs”). Please refer to Statistics Canada for the current list of CMAs and CAs.
While the Act is prohibitive to non-Canadians purchasing homes in Canada, there are cases where a non-Canadian can purchase a home even if they do not meet the above-mentioned rules.
Exceptions to the Act
The Act states that there are some exemptions to the rules. Individuals that fall under these exemptions can purchase a home in Canada even if they are “non-Canadians” by definition.
The current exceptions as outlined in the Act are as follows:
Canadian citizens and permanent residents;
Individuals who meet the conditions under the Immigration and Refugee Protection Act and are therefore “protected persons” such as:
Individuals with passports containing diplomatic, consular, official, or special representative acceptance;
refugees
A non-Canadian who purchases property with a spouse who is a Canadian citizen;
Inherited property;
An international student who:
Attends an educational institution designated by the government to host international students;
Filed tax returns in Canada for at least 5 years before the year of purchase;
Resided in Canada for at least 224 days per year for each of the 5 years prior to the year of purchase;
Purchases a property where the value does not exceed CAD$500,000
A temporary resident meeting the following requirements:
They must have a valid work permit, which must be valid for at least 183 days after date of purchase;
They must not have purchased more than one residential property
Penalties
The penalty for a non-Canadian (who doesn’t meet the exemptions) who purchases residential real estate in Canada can be up to CAD$10,000. Further, the Act also seeks to penalize anyone who aids, abets, assists, influences, or counsels, a non-Canadian to purchase a Canadian property, setting the fine at up to CAD$10,000. The Act is not the only roadblock for non-Canadians purchasing homes in Canada.
Ontario and BC Speculation Tax
If a foreign buyer is purchasing property in Ontario or British Columbia, there are additional taxes to consider.
In Ontario, the province introduced their own Non-Resident Speculation Tax (“NRST”) on certain purchases of residential property by foreign buyers in 2017. This tax is applied to foreign purchasers who purchase property in Ontario. The current NRST rate is 25% of the full purchase price of the property, whether it is 100% owned or not. There are certain exemptions to this tax, and rebates can also apply once the criteria are met.
British Columbia (“BC”) introduced their own separate speculation & vacancy tax, designed to turn vacant homes into housing for BC residents. It is an annual tax based on how property owners use their residential property, the owner’s tax resident status, and where their income is earned and taxed. This tax is calculated as either 0.5% or 2% of the property’s assessed value.
At the time of writing, no other province or territory in Canada has mandated any sort of foreign buyer tax.
For more information on the foreign home buyer ban or the Ontario and BC Speculation tax, please contact our Global Mobility team.
Authors: Jennifer Funes, Manager, Global Mobility Randall Timm, Director, Global Mobilty