Foreign Buyer’s Tax When Buying Property in British Columbia, Canada
Foreign Buyer’s Tax When Buying Property in British Columbia, Canada
Can foreigners buy property in Canada? The short answer is yes, but they will be subject to the foreign buyer’s tax in Ontario or British Columbia.
What is the Foreign Buyer’s Tax?
The BC foreign buyer’s tax is a fee charged to purchasers who are not Canadian citizens or permanent residents. This tax is in addition to the property transfer tax, and the provincial government issued it to address the problems with the housing market in Vancouver.
Timeline of the Foreign Buyer Tax in BC
The Vancouver housing crisis is not a recent development. In fact, it has been an issue since the late 1970s, and many factors have contributed to the massive growth in the Vancouver housing market.
This inflationary market resulted in Vancouver being named the third most unaffordable city in 2016. This statistic finally prompted the BC government to take action by introducing the Housing Initiatives Amendment Act.
This act can be divided into four distinct parts: the vacancy tax, foreign buyer’s tax, amendments to the Real Estate Services Act, and creating a new housing initiative.
The act was first announced in July 2016, and it received the royal assent before the end of the month. In August 2016, the BC government officially imposed the 15% foreign buyer’s tax, and this was raised to 20% of the purchase price in February 2018.
Areas Subject to the BC Foreign Buyers Tax
This expensive levy is applied to several regions in BC. the following regions are subject to the non-resident speculation tax:
- Fraser Valley Regional District
- Metro Vancouver Regional District
- Capital Regional District (Greater Victoria Area)
- Regional District of Central Okanagan
- Regional District of Nanaimo
If you are a foreign national that intends to purchase a home in one of these areas, be sure that you thoroughly understand the implications of the foreign buyer’s tax.
Calculating the BC Foreign Buyers Tax
The current rate is 20% of the purchase price of your home. That means if you buy a home valued at $700,000, you will be subject to a foreign tax of $120,000:
$700,000 x 20% = $120,000
The value subject to the tax is the purchase price of the residential portion of the property. You will pay the 20% tax on the fair market value of the whole property if the BC Assessment classifies the entire purchase as a class 1 residential area.
If the BC Assessment states that the property is agricultural land - even if it includes an owner’s dwelling - you are only responsible for paying the tax on residential improvements plus 0.5 hectares of land.
There are some instances where the property class is mixed. This means that it will include residential property like a condo, combined with a class 6 commercial space. In this scenario, you will pay the foreign buyer’s tax on the purchase price of the residential property. However, the commercial space is exempt from the additional transfer tax.
BC Tax Regulations and Exemptions For Foreign Buyer’s Tax
The tax regulations regarding foreign buyers in BC are very similar to those in Ontario. Any foreign national, foreign company, or taxable trustee that purchases a residential property in the province is subject to the non-resident speculation tax.
A foreign national can be exempt from this additional tax if they are also exempt from the property transfer tax. It is important to note that certain transfers, even if they are exempt from the property transfer tax, will be subject to the foreign buyer’s tax. These transactions include the following:
- A transfer to a surviving joint tenant due to the death of a joint tenant
- Any transfers made to change registered trustees that do not involve changing beneficiaries or trust terms
- A transfer that results from an amalgamation under the Business Corporations Act or a similar provisions
Individuals can also avoid the tax if they are confirmed as a BC provincial nominee or are acquiring the property on behalf of a limited partnership controlled by Canadians.
The exemption allowing Canadian-controlled limited partnerships to avoid the foreign buyer's tax was enacted as part of an amendment passed in June 2020. Before this amendment, the partnership regulations were somewhat unclear, but this adjustment is a positive development for investors in the BC real estate market.
If the transferee is acquiring the land on behalf of the limited partnership - of which every general partner is a Canadian citizen or permanent resident - the transaction will be exempt from the non-resident speculation tax.
This foreign buyer’s tax does not apply to a real estate investment trust or specified investment flow-through trusts, either.
Other Legal Implications As A Foreign Buyer Of Canadian Real Estate
When you purchase residential property as a foreigner, there are legal implications in addition to the foreign buyer’s tax. Purchasers are legally required to disclose information to the Canadian government regarding their intentions for the purchase of property and information regarding their residency and citizenship.
The information provided will describe whether the buyer intends to occupy the home as their principal residence after closing and the type of dwelling on the property. They must also disclose whether they intend to lease a portion of the land after purchase.
If the purchaser is a corporation, they must disclose information about their ownership, incorporation, and control. Purchasers acting as trustees must provide any relevant information about the beneficial owners of the property.
The foreign buyer’s tax is a major hurdle for purchasers in Ontario and BC that are not Canadian citizens or permanent residents. The assessment of 15% and 20%, respectively, is a significant expense in an already expensive market!
Although there are some exceptions, most foreign buyers of residential properties will be required to pay this additional tax. Keep this in mind if you are a foreign national looking to purchase a residential property in Ontario or BC.
What Professionals Will I Need to Help Me Buy Property in Canada?
To buy a property in Canada, you’ll normally need a real estate agent, a real estate lawyer, a home inspector, an insurance agent, a property manager and a lender. If you buy with my help, I will connect you to the best in the industry (and to people who have specific experience dealing with non-residents).
I want to buy a property in Canada, but not in Victoria. Can you help?
I only sell real estate in the Victoria area, though I am happy to recommend an agent in Canada’s other big cities.
Are you thinking about purchasing or selling your home in the near future? If you’re looking for a realtor to work with you and guide you through the process, then give me a call/text at 250-858-0288.. or email email@example.com to start a conversation.
Patrick Novotny eXp Realty Victoria, BC 250-858-0288
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