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Foreign Buyers Tax in Canada

This legislative summary offers a concise overview of the foreign buyer’s tax in Canada and its potential implications for those considering purchasing property in the country.

The foreign buyers tax rules effective from January 1, 2023, restrict non-Canadian individuals and commercial entities from acquiring Canadian residential properties. This legislative move aims to address concerns about domestic buyers being priced out of local housing markets nationwide. Last month, the government announced an extension of rules until January 1, 2027.

In response to concerns and to accommodate certain groups, the rules were revised. Under the revised regulations, individuals holding a valid work permit or authorized to work in Canada under the Immigration and Refugee Protection Regulations can purchase residential properties if their work permits have at least 183 days of validity remaining at the time of purchase and if they haven’t already acquired more than one property in Canada.

Similarly, individuals enrolled in authorized study programs at designated learning institutions, as defined by the Immigration and Refugee Protection Regulations, may purchase residential properties if they meet certain criteria, including filing income tax returns for the past five years, being physically present in Canada for a minimum of 244 days per year, and adhering to specific purchase price limitations.

While these amendments provide avenues for temporary residents to acquire Canadian properties, individuals in Ontario and British Columbia are subject to provincial tax provisions targeting foreign buyers.

In Ontario, the Non-Resident Speculation Tax (NRST), imposes a 25% fee on specific non-resident individuals purchasing properties in Ontario. Similarly, in British Columbia, foreign buyers face a 20% tax on their proportionate share of a residential property’s fair market value within specified regions.

Ontario’s NRST applies to foreign nationals purchasing residential properties anywhere in the province. The tax is applied in addition to the general Land Transfer Tax, and if a foreign national purchases a property jointly with a Canadian citizen or permanent resident, the NRST applies to the entire property value without proration.

Both Ontario and British Columbia offer rebates and exemptions under certain circumstances. In Ontario, foreign nationals may be eligible for a rebate if they become permanent residents within four years of purchasing a property and meet specific residency and ownership criteria.

In British Columbia, foreign buyers may qualify for a rebate if they become permanent residents or Canadian citizens within one year of registering a property transfer and fulfill residency requirements. Additionally, individuals nominated under the B.C. Provincial Nominee Program are exempt from additional property transfer taxes.