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In recent years, several measures related to the purchase and ownership of Canadian real estate came into effect. These new measures are designed to regulate Canada’s booming housing market.
The following is an overview of some of the new and existing rules that may affect owners of Canadian real estate property.
Effective January 1st, 2023, the Government of Canada has implemented a new law to prevent non-Canadians from purchasing real estate in Canada. This new law will be in effect for a two-year period beginning on January 1, 2023 and will apply to non-Canadian individuals, non-Canadian entities and foreign-controlled Canadian entities.
These rules do not apply to Canadian citizens or permanent residents of Canada. There could be exemptions available for certain individuals such as international students or workers who have spent or worked for a significant period of time in Canada prior to the purchase of the property.
The Ontario Non-Resident Speculation Tax applies on the purchase of any residential property located in Ontario by foreign nationals. A foreign national is an individual who is not a Canadian citizen nor a permanent resident of Canada. The tax will also apply to non-Canadian entities, foreign-controlled Canadian entities, and certain trusts. Effective October 25th, 2022, the Ontario government increased the tax from 20 to 25 per cent, applicable on the purchase price of any residential property in Ontario.
The province of British Columbia has a similar tax applicable to foreign nationals purchasing residential property in the province. The tax in British Columbia is currently 20 per cent and applies to the purchase of property in certain regions of the province, such as the city of Vancouver.
The Federal Underused Housing Tax is an annual 1 per cent tax on the ownership of vacant or underused residential property in Canada. The law took effect on January 1st, 2022 and applies to corporations, partnerships and trusts, whether they are resident or non-resident of Canada. The tax also applies to individuals who are not Canadian citizens nor permanent residents of Canada.
The annual 1 per cent tax is applied to the taxable value of the home if the property is considered “underused” in the year. If the property is occupied by you or rented to an individual at fair value, in periods of at least one month that total 180 days or more in the calendar year, the property would not be considered “underused,” and no tax would apply. There are other exceptions that could apply as well.
Although property-owners who own residential property that is not considered “underused” will not be liable for the tax, a return related to the Underused Housing Tax may still need to be filed by April 30th of the following year. Canadian citizens and permanent residents of Canada are not subject to the Underused Housing Tax and do not have a requirement to file the return.
