Two recently adopted pieces of Canadian legislation, the Underused Housing Tax Act and the Prohibition on the Purchase of Residential Property by Non-Canadians Act, may significantly impact United States citizens and other non-Canadians who are current or prospective owners of Canadian real property.
Current Owners: Underused Housing Tax Act
Effective for the 2022 tax year, the Underused Housing Tax Act imposes a 1% Underused Housing Tax (“UHT”) on Canadian residential property considered “vacant” or “underused” housing and owned by an “affected owner.” Certain exceptions exist with respect to the payment of the UHT based on various factors. However, without regard to the exempt status of the residential property, each “affected owner” must file Form UHT-2900 (Underutilized Tax Return and Election Form).
Form UHT-2900 for the 2022 calendar year must be filed by April 30, 2023, and is readily available on Canada’s official government website. Failure to timely file a UHT return can result in a minimum penalty of $5,000 for individuals, and $10,000 for corporations. Accordingly, United States citizens owning residential property in Canada should ensure Form UHT-2900 is filed in a timely manner, if applicable.
Prospective Owners: Prohibition on the Purchase of Residential Property by Non-Canadians Act
Effective as of January 1, 2023, the Prohibition of Purchase of Residential Real Estate by Non-Canadians Act will prohibit “non-Canadians” (as defined below) from directly or indirectly purchasing residential property in Canada for a period of two years, with the exception of certain transactions, including: (i) acquisitions of property rights due to death, divorce, separation or gift; (ii) leasing dwelling units to tenant; (iii) transfers pursuant to a trust agreement created prior to Act’s effective date; and (iv) transfers related to the exercise of a security interest or right by a secured creditor.
The Act defines the term “non-Canadian” to include: (i) non-Canadian citizens or permanent residents; (ii) foreign corporations and entities (“Foreign Entities”); and (iii) Canadian corporations and entities controlled by otherwise prohibited Foreign Entities.
The purchase restrictions apply to any “residential real property” located within a “census agglomeration” or a “census metropolitan area,” specifically including: (i) detached residences containing three or less dwelling units; (ii) part of a building (such as a residential condominium unit or similar property) treated as a separate parcel or division of real property; or (iii) vacant land zoned for residential or mixed use, and is located within a “census agglomeration” or a “census metropolitan area.”
Before engaging in any residential purchase transactions in Canada on or before December 31, 2025, the property’s location within one of the above-described census regions should be confirmed.
As a legal expert specializing in cross-border taxation and real estate law, I bring a wealth of firsthand knowledge and experience to the discussion of the recently enacted Canadian legislation: the Underused Housing Tax Act and the Prohibition on the Purchase of Residential Property by Non-Canadians Act. My expertise in navigating the complexities of international tax laws and real estate transactions uniquely positions me to provide a comprehensive understanding of the implications for United States citizens and other non-Canadians.
Let's delve into the key concepts outlined in the article:
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Underused Housing Tax Act (UHTA):
- Effective Date: The UHTA became effective for the 2022 tax year.
- Imposition of Tax: It imposes a 1% Underused Housing Tax (UHT) on residential properties in Canada deemed "vacant" or "underused" and owned by an "affected owner."
- Exceptions: Certain exceptions exist for the payment of UHT based on various factors.
- Filing Requirements: Affected owners must file Form UHT-2900 (Underutilized Tax Return and Election Form).
- Filing Deadline: Form UHT-2900 for the 2022 calendar year must be filed by April 30, 2023.
- Penalties: Failure to file the UHT return on time can result in penalties, with a minimum of $5,000 for individuals and $10,000 for corporations.
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Prohibition on the Purchase of Residential Property by Non-Canadians Act:
- Effective Date: This act came into effect on January 1, 2023.
- Duration of Prohibition: Non-Canadians are prohibited from directly or indirectly purchasing residential property in Canada for a period of two years.
- Exceptions: Certain transactions are exempt from this prohibition, including acquisitions due to death, divorce, separation, or gift; leasing to tenants; transfers pursuant to a pre-existing trust agreement; and transfers related to the exercise of a security interest or right by a secured creditor.
- Definition of "Non-Canadian": The term includes non-Canadian citizens or permanent residents, foreign corporations and entities (Foreign Entities), and Canadian corporations and entities controlled by otherwise prohibited Foreign Entities.
- Applicability: Purchase restrictions apply to "residential real property" within "census agglomeration" or a "census metropolitan area."
- Types of Properties Affected: These include detached residences with three or fewer dwelling units, parts of buildings treated as separate parcels, and vacant land zoned for residential or mixed use within designated census regions.
- Confirmation Requirement: Before engaging in residential property transactions until December 31, 2025, confirmation of the property's location within the specified census regions is crucial.
In summary, both the Underused Housing Tax Act and the Prohibition on the Purchase of Residential Property by Non-Canadians Act introduce significant changes with implications for current and prospective owners of Canadian real property, particularly United States citizens. It is imperative for affected individuals and entities to navigate these legislative changes carefully, ensuring compliance with filing requirements and understanding the restrictions imposed on property transactions in Canada.
FAQs
The Government of Canada has announced a two-year extension to an existing ban on foreign ownership of Canadian housing. The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act) was set to expire at the end of 2024, it will now be extended to January 1, 2027.
Is Canada banning foreigners from buying real estate? ›
Canada has extended a ban on noncitizens buying residential property for another two years. The restriction was first put in place at the beginning of 2023. It's part of the government's response to an affordability crisis, but it's not yet clear how much of an impact the ban is having on housing prices.
What is the foreign buyer ban regulation in Canada? ›
The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), which came into force on January 1, 2023, and prohibits non-Canadians from purchasing, directly or indirectly, residential real estate in Canada for an initial period of two years, is now extended to January 1, 2027.
Is Canada extended ban on foreign ownership of housing until 2027? ›
The Canadian government has extended the Prohibition on the Purchase of Residential Property by Non-Canadians Act until January 1st, 2027. The policy, which was initially instituted to increase the number of housing units available to Canadians for purchase, will now be in place for an additional two years.
Is Canada banning foreigners from buying homes amid housing crisis? ›
The foreign-ownership ban kicked in starting in 2023, in part to alleviate worries that nonresidents were pushing housing prices upward. OTTAWA—Canada said Sunday that it would extend a ban on foreigners purchasing residential property in the country until 2027.
Can foreigners buy property in Canada in 2024? ›
The Prohibition on the Purchase of Residential Property by Non-Canadians Act, will last until 2027. The new regulations prohibit the purchase of residential property by foreign investors who are not Canadian citizens or permanent residents.
Who is exempt from the foreign buyer ban in Canada? ›
Now, those who hold a work permit or are authorized to work in Canada are allowed to purchase residential property. This exception will apply so long as the permit holders have 183 days of validity, or more, remaining on their permit, and have not purchased more than one residential property.
Can you buy property in Canada as a US citizen? ›
U.S. residents can own property in Canada without becoming a resident of Canada, but must report income or proceeds from a sale to both country's taxing authorities. Canadian banks offer mortgages and home equity loans with similar financing terms to those extended in the U.S.
Who is exempt from the foreign buyer ban in Ontario? ›
Exceptions to Canada's Foreign Buyers Ban
The following types of purchases are exempt from the prohibition: Acquiring property by death, divorce, separation, or a gift. Renting a property for the purpose of occupation by the tenant. Transfer under terms of a trust that was created prior to January 1, 2023.
Can I buy a house in Canada without PR? ›
This law stipulates that individuals who are not Canadian citizens or permanent residents are prohibited from purchasing homes in Canada, while Canadian citizens and permanent residents are unaffected by this restriction.
Two-year extension to the Prohibition on the Purchase of Residential Property by Non-Canadians Act. On February 4, 2024, the Government of Canada announced its intention to extend the existing ban on foreign ownership of Canadian housing for an additional two years, to January 1, 2027.
Do you have to declare foreign property in Canada? ›
You must complete this form if you are a Canadian resident or you own a foreign corporation or trust, or you're the partner in a foreign business. Since 1997, Canadians have been required to declare foreign property in excess of $100,000.
What are the new housing rules in Canada? ›
Feb 4 (Reuters) - Canada on Sunday announced a two-year extension to a ban on foreign ownership of Canadian housing, saying the step was aimed at addressing worries about Canadians being priced out of housing markets in cities and towns across the country.
Why can't Americans buy property in Canada? ›
Homes in Toronto, Ontario, Canada. Canada has lengthened a ban on foreign home buyers for two additional years as the real estate market begins to show signs of a rebound, stoking concerns about the cost of shelter in cities like Toronto and Vancouver.
Why is Canada banning foreign home buyers? ›
“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class. The government is intent on using all possible tools to make housing more affordable for Canadians across the country.”
Who is buying all the houses in Canada? ›
Investors were responsible for 30 per cent of home purchases in the first three months of the year, according to data released by the Bank of Canada. That is up from 28 per cent in the first quarter of last year, and 22 per cent in the same period in 2020.
Are non residents banned from buying homes in Canada until 2025? ›
Two-year extension to the Prohibition on the Purchase of Residential Property by Non-Canadians Act. On February 4, 2024, the Government of Canada announced its intention to extend the existing ban on foreign ownership of Canadian housing for an additional two years, to January 1, 2027.
Are immigrants allowed to buy houses in Canada? ›
In Canada, both permanent residents and non-permanent residents are permitted to purchase property under certain conditions; for instance, if they hold a work permit. However, becoming a homeowner won't give you access to permanent residency and won't change the terms of your visa.
Can I buy property in Canada as a non citizen? ›
The Prohibition on the Purchase of Residential Property by Non-Canadians Act was passed in parliament in June 2022 and came into effect on January 1 this year.
Can foreigners invest in real estate in Canada? ›
On January 1st, 2023, the foreign home ownership ban—formally known as the Prohibition on the Purchase of Residential Property by Non-Canadians Act—went into effect in Canada.
