What You Need To Know About Foreign Buyer's Tax In Canada

Ga
Green and Spiegel LLP

Contributor

Green and Spiegel is one of the world's oldest immigration law firms, with over 60 years of experience assisting a global clientele. Focusing exclusively on immigration law, the lawyers at Green and Spiegel provide a broad range of immigration services to individual, institutional, and corporate clients in Canada, the United States, and Europe.
As the oldest immigration firm in Canada, we frequently encounter questions from our clients about how their immigration status might affect their purchase of property in Canada.
Canada Immigration
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As the oldest immigration firm in Canada, we frequently encounter questions from our clients about how their immigration status might affect their purchase of property in Canada. This blog provides a brief overview of the foreign buyer's tax in Canada, and how this tax may impact you when deicing to purchase a home in Canada.

Federal Foreign Buyer Ban1

On June 23, 2022, the Prohibition on the Purchase of Residential Property by Non-Canadians Act was passed by parliament and came into effect on January 1, 2023, which prohibits non-Canadians individuals and commercial enterprises from purchasing, directly or indirectly, any Canadian residential property. This ban was in response to increased concerns about Canadian buyer's being priced out of local housing markets across the country. On February 4, 2024, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced that the Federal Foreign Buyer Ban on Canadian housing is expected to extend by an additional two years. The ban on foreign ownership of Canadian housing, which is currently set to expire on January 1, 2025, will be extended to January 1, 2027. As a result, foreign individuals who are not Canadian citizens or permanent residents will continue to be prohibited from purchasing residential property in Canada.

The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance states, "[b]y extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class. The government is intent on using all possible tools to make housing more affordable for Canadians across the country."

Amendments to the Prohibition

On March 27, 2023, the Honourable Ahmed Hussen, Minister of Housing and Diversity and Inclusion, announced amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act's accompanying Regulations.2 These amendments were aimed at expanding the exceptions of the Act to allow non-Canadians, in particular those working or studying in Canada, to purchase residential property in certain circumstances.

If you hold a work permit (or are authorized to work in Canada under the Immigration and Refugee Protection Regulations), you are eligible to purchase residential property if you have 183 days or more of validity remaining on your work permit at the time of purchase, and you have not purchased more than one residential property in Canada.

In addition, those who are enrolled in a program of authorized study at a designated learning institution, as defined in section 211.1 of the Immigration and Refugee Protection Regulations, may also purchase residential property if they (i) filed all required income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which the purchase was made, (ii) they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made, (iii) the purchase price of the residential property does not exceed $500,000, (iv) and they have not purchased more than one residential property.

Foreign Buyer's Tax

Although this amendment allows for temporary residents to purchase Canadian property, those individuals in Ontario and British Columbia are subject to special provincial tax provisions.

The Non-Resident Speculation Tax (NRST), which is also referred to as the Foreign Buyer's Tax, is a fee imposed on specific non-resident individuals when purchasing a property within any area of Ontario and designated regions of British Columbia. This tax, which is 25% in Ontario and 20% in British Columbia, is aimed to address the impact of foreign investment on local housing markets.

Ontario3

The NRST applies to the purchase or acquisition of an interest in residential property located anywhere in Ontario by individuals who are foreign nationals. Under the Immigration and Refugee Protection Act a foreign national is a person who is not a Canadian Citizen or a permanent resident. Effective October 25, 2022, the NRST rate is 25%. The NRST is applied in addition to the general Land Transfer Tax.

It is important to note that, if a foreign national purchases a property with a Canadian Citizen or permanent resident, the NRST is not prorated, and the NRST applies to the full value of the property with each transferee liable for any NRST payable.

NRST Rebate

There are some circumstances where foreign nationals in Ontario who have paid the NRST can receive a tax rebate.

If a foreign national becomes a permanent resident subsequent to the purchase of their home, and meets the criteria below, they are eligible for the Permanent Resident of Canada NRST Rebate. If you are eligible for the Permanent resident of Canada NRTS rebate, the entire NRST paid on the purchase of the property will be rebated.

To qualify for this rebate, the foreign national must have paid the NRST and must meet all of the following conditions:4

  • become a permanent resident of Canada within four years from the date of the purchase or acquisition
  • hold the property alone or with their spouse
  • occupy the property, along with their spouse, if applicable, as their principal residence for the duration of the period that begins within 60 days after the date of purchase and ends when they make an application for the rebate or the rebate conditions have been met, whichever is later

Please note that for a conveyance that occurred after March 29, 2022, the Permanent Resident of Canada NRST Rebate is the only option available. Prior to this date, the Transitional international student NRST rebate and Transitional foreign national working in Ontario NRST rebate was also available.

Rebate Application Process

Importantly, applications for both the must be received by the ministry within 90 days of becoming a permanent resident of Canada. It is important to note that the date you are issued or receive your Permanent Resident Card is not the date that should be relied on for determining when you became a permanent resident of Canada. Proof of permanent resident status can include:

  • a Confirmation of Permanent Residence document, signed and dated by an immigration officer
  • a letter from IRCC advising that the application for permanent resident status is complete, that the individual is a permanent resident of Canada

Provincial Nominee Exemption

If you receive an Ontario Immigrant Nominee Program certificate, an exemption from NRST may be available if the following is met:

  • the foreign national is nominated under the Ontario Immigrant Nominee Program (nominee) at the time of the purchase or acquisition
  • the foreign national has applied or certifies that they will apply to become a permanent resident of Canada before the expiration of their nominee certificate
  • if the foreign national holds the property with any other transferees, those transferees must be individuals who are Canadian citizens, permanent residents of Canada, nominees or protected persons
  • all transferees must certify that they will occupy the property as their principal residence

British Columbia5

In British Columbia, if the property is within specified area, a foreign national must pay an additional foreign buyer property tax on the individual's proportionate share of a residential property's fair market value. The proportionate share is the percentage of interest that the individual registers on title with the Land Title Office.

If the property transfer is within the following areas, the tax rate is 20% on the fair market of the individual's proportionate share:

Rebate

In British Columbia, you may qualify for a rebate if you meet the following criteria:

  • Become a permanent resident or Canadian citizen within one year from when the property transfer was registered with the Land Title Office
  • Used the home as your principal residence
  • Moved into the home within 92 days from the date the property transfer was registered
  • Continued to inhabit the home as your principal residence for a continuous period of at least one full year after the date you moved into that home
  • Not received a B.C. Provincial Nominee exemption

Rebate Application Process

You must apply for a refund after the first anniversary and before 18 months from the date the property transfer was registered at the Land Title Office. Note: You must become a permanent resident or Canadian citizen within one year of the date of registration.

Provincial Nominee Exemption

In British Columbia, if you are a foreign national individual who receives confirmation under the B.C. Provincial Nominee Program, you do not pay the additional property transfer tax if you claim the exemption.

To qualify for this exemption:

  • You must be a confirmed B.C. Provincial Nominee when the property transfer is registered with the Land Title Office
  • The property must be used as your principal residence
  • The property transfer must be made to an individual

Purchasing a property is an important milestone of a foreign national's journey to Canada. It is important to understand how your immigration status can affect this process. Additionally, it is important that you speak to a real estate specialist prior to entering into any agreement of purchase and sale of property. For a more in-depth understanding or personalized guidance on immigration-related matters, please contact us.

Footnotes

1. https://www.canada.ca/en/department-finance/news/2024/02/government-announces-two-year-extension-to-ban-on-foreign-ownership-of-canadian-housing.html

2. https://www.cmhc-schl.gc.ca/media-newsroom/news-releases/2023/amendments-prohibition-purchase-residential-property-non-canadians-regulations

3. https://www.ontario.ca/document/non-resident-speculation-tax

4. https://www.ontario.ca/document/non-resident-speculation-tax/non-resident-speculation-tax-rebates-and-refunds

5. https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/additional-property-transfer-tax

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

What You Need To Know About Foreign Buyer's Tax In Canada

Canada Immigration

Contributor

Green and Spiegel is one of the world's oldest immigration law firms, with over 60 years of experience assisting a global clientele. Focusing exclusively on immigration law, the lawyers at Green and Spiegel provide a broad range of immigration services to individual, institutional, and corporate clients in Canada, the United States, and Europe.
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