It's always a good idea to seek legal advice from a professional who is familiar with Canadian laws and regulations, before making any real estate transactions as a non-resident.
Non-Canadian residents are allowed to buy property in Canada, but there may be restrictions on the type of property they can purchase and additional taxes that they are required to pay. For example, non-residents may not be able to buy certain types of restricted farmland or property that is designated as a primary residence. Additionally, non-residents may be subject to a non-resident speculation tax and may be required to pay the GST/HST on the purchase price of the property. That being said, it is best to consult with a real estate lawyer or a tax professional to understand the specific regulations and tax implications for non-residents buying property in Canada.
The reasons for prohibiting or restricting non-Canadian residents from buying residential property in Canada, can vary depending on the specific regulations in place in each province. Generally, the main reasons are:
To protect the housing market: Governments may want to ensure that there is enough affordable housing available for Canadian residents and may impose restrictions on foreign buyers to prevent them from driving up property prices.
To prevent money laundering: Restrictions on foreign buyers may be put in place to prevent the use of real estate as a way to launder money.
To generate revenue: Governments may impose additional taxes on foreign buyers, such as the non-resident speculation tax (NRST) in Ontario, as a way to generate revenue.
To safeguard Canadian citizens: By prohibiting or restricting the purchase of residential property by non-Canadians, the government wants to ensure that Canadians have priority access to own a property in their country.
It is important to note that laws and regulations regarding foreign ownership of property in Canada can vary between provinces, so it's best to consult with a real estate lawyer or a tax professional to understand the specific regulations in the province where you are looking to purchase property.
Non-Canadian buyers looking to purchase residential property in the Greater Golden Horseshoe region of Ontario (which includes cities such as Toronto and Niagara) are subject to the non-resident speculation tax (NRST). The NRST is a 25% tax on the purchase price of the property. This tax applies to foreign buyers, including individuals, corporations, and trusts that are not citizens or permanent residents of Canada, as well as foreign corporations and foreign trusts. When a non-Canadian resident sells a property in Canada, a lawyer or notary handling the sale is typically responsible for withholding 25% of the sale price as the Non-Resident Speculation Tax (NRST) and remitting it to the Canadian government. This is a legal requirement under Canadian tax laws.
Here's an example of how the Non-Resident Speculation Tax (NRST) and the Foreign Buyers' Tax (FBT) might be applied in a hypothetical scenario:
A non-Canadian resident, John, sells a property in Toronto for $500,000. As a non-resident, John is subject to the NRST, which is 25% of the sale price. Therefore, $125,000 (25% of $500,000) must be withheld by the lawyer or notary handling the sale and remitted to the Canadian government. Additionally, let's say that the property is located in a province that has implemented the FBT. Therefore, the lawyer or notary will also collect the FBT of 1.5% of the sale price. In this case, $7500 (1.5% of $500,000) must be collected and remitted to the government.
In this scenario, the lawyer or notary will hold $125,000 + $7500 = $132500 in trust, separate from their own funds, until it is remitted to the government. The lawyer or notary will also be responsible for ensuring that the appropriate paperwork and documentation is filed with the government to report the withholding of the NRST and FBT.
It is important to note that this is a hypothetical example, and the actual taxes, regulations and procedures may vary depending on the location and specific circumstances of the sale. It is always a good idea to seek legal and tax advice from a professional familiar with Canadian laws and regulations before making any real estate transactions as a non-resident.
If a client, who is a non-Canadian resident, asks a lawyer to assist with a real estate transaction in Canada, the lawyer should take several steps to ensure that the client fully understands the legal implications of the purchase and that the transaction is conducted in compliance with all relevant laws and regulations.
Advise on the regulations: The lawyer should advise the client on the specific regulations and restrictions that apply to non-Canadian residents buying property in Canada, such as the non-resident speculation tax (NRST) in Ontario or the "Additional Property Transfer Tax on Foreign Entities" in British Columbia.
Review all documentation: The lawyer should review all the legal documents related to the purchase, including the purchase and sale agreement and any mortgage or financing documents, to ensure that they are in the client's best interest and that the client fully understands the terms and conditions of the agreement.
Advise on financing options: The lawyer should advise the client on the financing options available to them as a non-resident, including any restrictions or additional requirements that may apply.
Conduct due diligence: The lawyer should conduct due diligence on the property and the seller to ensure that the property is legally available for sale and that there are no outstanding liens or encumbrances on the property.
Advise on independent legal advice: The lawyer should advise the client on the importance of obtaining independent legal advice to ensure that the client fully understands the legal implications of the purchase and that they are not being coerced or unduly influenced by the other party.
It is important to remember that the lawyer has a professional and ethical obligation to act in the best interest of the client and to ensure that the client fully understands the legal implications of the transaction.
As a non-Canadian buyer looking to purchase property in Canada, it is important to seek legal advice to understand the specific regulations and tax implications that apply to your purchase. Here are a few things to keep in mind:
Hire a lawyer: It is important to hire a real estate lawyer who is familiar with the Canadian real estate market and can guide you through the legal process of buying property.
Understand the tax implications: You will need to pay taxes when buying property in Canada, such as the non-resident speculation tax (NRST) in Ontario, or the "Additional Property Transfer Tax on Foreign Entities" in British Columbia. Seek advice from a tax professional to understand the specific tax implications of your purchase.
Know the restrictions: Non-residents may have restrictions on the type of property they can purchase. For example, certain types of restricted farmland or property that is designated as a primary residence may not be available to foreign buyers.
4. Be aware of financing options: As a non-resident, you may have different financing options available to you than a Canadian resident. Seek advice from a financial advisor to understand your options.
Review all documentation carefully: Before signing any legal documents, ensure that you understand all the terms and conditions and that they are in your best interest.
There are some exemptions to the NRST, such as if the non-resident is a student, if they intend to make the property their primary residence, or if they are purchasing the property as part of a business.
As well, it is important to note that in some provinces, the lawyer or notary will also collect the foreign buyer’s tax (FBT) if it applies. This tax is an additional tax that is imposed on non-resident buyers of Canadian property.
It's best to consult with a lawyer or tax professional to understand the exemptions and regulations regarding the NRST, as well as any other taxes that may apply when purchasing property in Ontario as non-residents.
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This material is for informational purposes only and should not be relied upon as legal advice. To book a consultation with Buzaker Law Firm regarding reviewing your commercial lease agreement or other real estate-related or corporate documents, contact us at info@vblegal.ca or (905) 370-0484.