Buying Canadian Property as a Foreign Resident

by Oct 20, 2023News, Tax Planning

As a US resident contemplating a potential move to Canada, there are many moving pieces that may factor into your decision-making process. One of the key considerations in any move, especially one that involves a new country of residence, is where you’re going to live. Over the past few years, Canada has begun to take a more aggressive approach to limit certain ownership options for non-Canadian citizens, and as such it is paramount to understand what your restrictions are, and what costs, if any, will apply to you, before making your decision to move.

Over the past 3 years, Canada and its provinces have begun to implement new restrictions to foreign purchasers of Canadian real estate, including US residents. In general, the federal and provincial mandates are separate from each other, and can often have unfavorable overlap. This makes it important to understand both sets of rules to be able to view your potential homebuying process from a holistic frame of reference. At a high level, the new federal restrictions that have been put in place establish a set of foreign buyers who are flatly ineligible to purchase, and the provincial mandates generally put forth a tax regime for said foreign buyers.

Federally, in 2022, the Canadian government put forth ‘The Prohibition on the Purchase of Residential Property by Non-Canadians Act’ which went into effect on January 1, 2023. The purpose of this legislation was to prevent non-Canadians from purchasing any residential real estate in Canada for a two-year period from January 1, 2023 to December 31, 2024. Of key importance in this Act is understanding who is considered a non-Canadian, as well as what constitutes a ‘residential property’.

Rather than explicitly outlining who is a non-Canadian, the Act outlines that anybody who is not one of the following is considered non-Canadian:

  1. A Canadian Citizen
  2. A Permanent Resident of Canada
  3. A Person registered under ‘The Indian Act’

The Act also applies to corporations based in Canada that are:

  1. Privately held
  2. Not listed on a Stock Exchange in Canada
  3. Controlled by a non-Canadian, as defined above

The above definition of non-Canadian leaves little room for interpretation, however there are a few explicit exceptions:

  1. Temporary Foreign Students
  2. Temporary Foreign Workers
  3. Refugees
  4. Accredited members of foreign missions
  5. Spouses of a Canadian

Each one of the above exceptions has certain criteria which must be met in regards to the purchaser and the property in question.

The Act defines residential property as buildings with 3 homes or less, as well as parts of buildings like a semi-detached house or a condominium unit. The law does not prohibit the purchase of larger buildings with multiple units.

Beyond the federal Act, many of the provinces have instituted restrictions on foreign purchases in the form of a non-resident speculation tax (NRST). Currently Ontario and British Columbia have fully enacted NRSTs with Nova Scotia and New Brunswick having tabled NRSTs in their current budget. The tax for foreign buyers ranges from 20-30% depending on the province, however there is potential relief for buyers who are in the process of becoming a Canadian resident as defined above.

As you can see, Canada’s recent restrictions on foreign buyers can have a huge impact on your decision on when, where, and how to move to Canada as a US resident. These rules are also ever evolving. As such, if you are thinking of a move to Canada, it is important to work with an expert cross-border firm such as MCA that can help you navigate the complicated process of such a move.

Brad Hemphill

Brad Hemphill

Cross Border Financial Planner

MCA Cross Border Advisors, Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The content of this presentation is for information purposes only and should not be construed as investment or financial advice. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.