CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Miguel Manzano, Stikeman Elliott LLP
In most jurisdictions, the buyer is liable for the pay - ment of land transfer tax and is typically responsible for paying the applicable sales taxes, registration fees and other expenses relating to the purchase. Taxation on Property Transfers to Foreign Nationals/Corporations British Columbia and Ontario impose taxes of 20% and 25%, respectively, on the transfer of certain resi - dential properties (limited to certain geographic areas in British Columbia) to foreign nationals, foreign cor - porations or trustees for a beneficial owner that is a foreign national or foreign corporation. The City of Toronto imposes an additional tax of 10% on such transfers. 2.11 Legal Restrictions on Foreign Investors The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act enacted on 1 January 2023 and extended in 2024 through 1 January 2027 prohibits certain persons from purchasing residential property in Canada. Residential property is defined to include a detached or semi-detached (townhouse) house and a condominium unit that is located within specified urban areas, including major cities such as Toronto and Vancouver. The prohibition applies to non-Canadians, including individuals who are not Canadian citizens or permanent residents, and corpo - rations and other entities (such as partnerships) which are controlled by a non-Canadian. Notably, control is defined as direct or indirect ownership in an entity that represents at least 10% of the value of the entity or that carries 10% or more of the voting rights, or control of that entity on a factual basis. It is currently unclear what “factual control” means for the purposes of this prohibition. Exceptions to these restrictions include: • certain temporary workers may purchase residen - tial property; • non-Canadians who purchase residential property with their spouse or common-law partner if such spouse or common-law partner is permitted to acquire residential property under the Act; and • certain persons prescribed under the Regulations. A purchase does not include:
• an acquisition of a right resulting from death, divorce, separation or a gift; • rental of a dwelling unit to a tenant for that tenant’s occupation; • transfer under a trust that existed prior to the Act coming into force; • transfers from the exercise of a security interest or secured right by a secured creditor; or • acquisition by a non-Canadian of residential prop - erty for the purposes of development. Also at the federal level, the Competition Act and the Investment Canada Act require notification to, or review by, the federal government in certain cir - cumstances involving acquisitions by non-resident purchasers. The federal Citizenship Act also permits each province and territory to enact laws restricting ownership of real property by non-residents. At the provincial and territorial level, most jurisdic - tions have taken measures to restrict the ownership of interests in farmland, rural recreational land or land in non-urban centres by non-Canadians, and certain jurisdictions limit the amount of farmland that can be owned by non-residents. Some provinces and ter - ritories also require that non-Canadian corporations obtain an extra-provincial licence or complete certain registrations to own real estate. While not a restriction on ownership, some provinces and municipalities impose annual taxes of up to 5% of a property’s value where the property is neither the owner’s principal residence nor made available for long-term rental, to encourage rental of underused residential properties in major urban centres. Con - versely, a federal underused housing tax introduced in 2022 has been eliminated for 2025 and subsequent years. As mentioned in 2.10 Taxes Applicable to a Transac- tion , British Columbia and Ontario also impose addi - tional taxes on foreign investors.
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