Federal government narrows the scope of the Foreign Home Buyers Ban
On March 27, 2023, the Federal government announced important changes to the Foreign Home Buyers Ban, which came into effect on January 1, 2023. We previously published a detailed tax alert explaining the Foreign Home Buyers Ban. The new amendments, which are described in more detail below, narrow the circumstances in which the Ban applies.
The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) and accompanying Regulations prohibit “non-Canadians” from purchasing, directly or indirectly, residential properties located in many municipalities across Canada until January 1, 2025. Contravention of the Act can result in a fine and court-ordered sale of the property.
On March 27, 2023, the Regulations were amended in five main ways:
- Land that does not contain any habitable dwelling is no longer a prescribed residential property for purposes of the Act. As a result, non-Canadians purchasing vacant land will not be subject to the Foreign Home Buyers Ban.
- A new exception was created, such that the acquisition of residential property for the purposes of development no longer constitutes a “purchase”. As a result, non-Canadians can acquire residential properties for purposes of development without being subject to the Foreign Home Buyers Ban. Note that neither the Act nor Regulation define what constitutes “development” for purposes of the Act.
- The Act continues to apply to corporations or entities formed under the laws of Canada if they are “controlled” by non-Canadians. However, the threshold ownership percentage to meet the definition of “control” has increased. Under the original version of the Regulations, “control” was defined to mean (a) direct or indirect ownership of shares or interests representing 3% or more of the votes or equity value of the corporation or entity, and (b) factual control, directly or indirectly and whether through ownership, agreement or otherwise. The threshold set out in (a) has now changed from 3% to 10%. As a result, a private corporation with less than 10% non-Canadian ownership will not be subject to the Foreign Home Buyers Ban, provided it is not factually controlled by non-Canadians.
- Non-Canadian controlled entities formed under the laws of Canada whose shares are listed on a designated stock exchange in Canada are not subject to the Foreign Home Buyer Ban.
- Temporary residents of Canada who hold a work permit or who are authorized to work in Canada under the Immigration and Refugee Protection Regulations are not subject to the Foreign Home Buyers Ban, provided they have 183 days or more remaining on their work permit or work authorization and have not purchased more than one residential property.
Notwithstanding these changes, which narrow the scope of the Foreign Home Buyers Ban, the Act continues to impose a broad ban on the purchase by non-Canadians of residential real estate located within census agglomerations and census metropolitan areas in Canada. Persons who may be “non-Canadians” under the Act and plan on purchasing Canadian residential real estate before January 1, 2025 should seek legal advice.