Sellers and professionals in the real estate sector are facing new policies that took effect on January 1. Information that affects us all at one level or another!
Below you will find details about the Non-Canadian Home Ownership Ban Act, as well as information about the new anti-flip law.
As of January 1, 2023, the federal government began banning non-Canadians from buying residential properties in Canada and this ban will be in effect for two years. The Act was implemented with the goal of making housing more accessible to Canadians.
According to this law, a residential property includes detached and semi-detached properties, townhouses, condominium apartments and buildings with three units or less.
Penalties: The Act states that a non-Canadian who contravenes the ban or any person or entity who knowingly assists a non-Canadian in contravening the ban may be fined up to $10,000. In addition, a court can order the sale of a purchased property if it is found that a non-Canadian acquired it in contravention of the Act.
On March 27, 2023, the federal government made changes to the list of exemptions to the Non-Canadian Purchase of Residential Real Property Regulations. Under the amended Regulations, the prohibition no longer applies to residential properties purchased for development, vacant lots zoned for residential or mixed use, and holders of work permits (which will remain valid for at least 183 days from the date of purchase). You can find more information on the Government of Canada website.
This is a 1% annual tax on vacant or underutilized residential real estate in Canada. The tax primarily affects non-resident and non-Canadian owners, but may also apply to Canadian individuals and businesses in special situations.
Every owner of residential property in Canada subject to the tax must file, by April 30, 2023, a return for the underutilized housing tax for each residential property owned in Canada as of December 31, 2022, even if the The building in question is subject to an exemption.
The Canada Revenue Agency (CRA) designates any owner of residential property in Canada on December 31 of a given calendar year who was not excluded on that date as being subject to tax.
any trustee of a trust (excluding personal representatives of a deceased person as well as trustees of a mutual fund trust, real estate investment trust or a SIFT trust for Canadian income tax purposes); any partner in a partnership; and any company that is incorporated outside of Canada, whose shares are not listed on a stock exchange in Canada, or that does not have share capital.
Excluded owners are exempt from the obligation to submit a declaration.
Canadian citizens and permanent residents are considered excluded unless listed as a taxable owner.
Exemptions include, but are not limited to: residential properties used as vacation properties located in a qualifying region of Canada that the owner or his or her spouse or common-law partner occupies for at least 28 days during the calendar year.
Use the Underutilized Vacation Property Designator Tool to determine if your residential property qualifies for an exemption. Note: A tax declaration must be filed, even if the property is subject to an exemption.
Penalties: Failure to file the return on time may result in taxable owners paying a minimum penalty between $5,000 and $10,000.
More information, including how the Underutilized Housing Tax applies to corporations, can be found on the Government of Canada website.
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