CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Miguel Manzano, Stikeman Elliott LLP
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 (limited to certain geographic areas in British Columbia) to foreign nationals, foreign corporations or trustees for a beneficial owner that is a foreign national or for - eign 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 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 -
(Canada). Each province and territory has similar legislation. Expropriation legislation across the country sets out procedural requirements for expropriating authorities, such as prescribed notice periods. Compensation is generally based on fair market value of the subject lands and may include costs and damages. 2.10 Taxes Applicable to a Transaction Transfer tax is imposed at the provincial level and is typically payable upon registration of the transfer instrument in the relevant land registry. Certain municipalities (such as the City of Toron - to, Ontario and various municipalities in Quebec) may levy land transfer tax in addition to the tax levied by the province. In Quebec, municipali - ties charge and collect transfer duties. Taxation rates vary across the country, from a high of 10% of the consideration for certain residential properties in Toronto, to no tax at all in Alberta, Newfoundland and Labrador, and parts of Nova Scotia. All provinces charge registration fees, which are generally nominal. In Ontario and Quebec, unregistered transfers of beneficial interests in real property are also taxed, subject to some exceptions. In Ontario (but not in Quebec), the transfer of an interest in a partnership that owns land is considered a taxable transfer of beneficial interest in that land. In most jurisdictions, the buyer is liable for the payment of land transfer tax and is typically responsible for paying the applicable sales tax - es, registration fees and other expenses relating to the purchase.
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