CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Patrick Morin, Stikeman Elliott LLP
responsible for paying the applicable sales tax - es, 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 residential properties in certain urban areas to foreign nationals, foreign corporations or trustees for a beneficial owner that is a foreign national or foreign corporation. 2.11 Legal Restrictions on Foreign Investors The federal Prohibition on the Purchase of Resi - dential Property by Non-Canadians Act enacted on 1 January 2023 currently imposes a four- year restriction on certain persons purchasing residential property in Canada. Residential prop - erty is defined to include a detached or semi- detached (townhouse) house and a condomin - ium 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 corporations and other entities (such as partner - ships) 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 residential property;
• non-Canadians who purchase residential property with their spouse or common-law partner if such spouse or common-law part - ner is permitted to acquire residential prop - erty under this Act; and • certain persons prescribed under the Regula - tions. 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 this Act coming into force; • transfers from the exercise of a security inter - est or secured right by a secured creditor; or • acquisition by a non-Canadian of residential property for the purposes of development. Also at the federal level, the Competition Act and the Investment Canada Act require notifi - cation to, or review by, the federal government in certain circumstances 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 juris - dictions have taken measures to preserve farm or non-urban land, and certain jurisdictions limit the amount of farmland that can be owned by non-residents. Some provinces and territories also require that non-Canadian corporations obtain an extra-provincial licence or complete certain registrations to own real estate. For discussion of the Ontario and British Colum - bia foreign buyer taxes and under-used housing
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