Foreign Buyer Ban Takes Effect January 1: The Tax Implications

Key takeaways

• The Prohibition on the Purchase of Residential Property by Non-Canadians Act took effect January 1, 2023
• It prohibits non-Canadians from purchasing residential property in Canada for a two-year period (extended to 2025)
• Exceptions include: properties with more than 3 units, recreational properties, commercial properties, and some rural properties
• Canadian citizens, permanent residents, and protected persons are exempt
• Violators and their assistants (including real estate agents and lawyers) can face fines up to $10,000

The foreign buyer ban — formally the Prohibition on the Purchase of Residential Property by Non-Canadians Act — took effect January 1, 2023, initially for a two-year period. It was subsequently extended to January 1, 2027. The prohibition targets non-Canadians buying residential property in census metropolitan areas and census agglomerations.

Who is prohibited

A non-Canadian for the purposes of this Act includes: non-Canadian citizens, non-permanent residents, private corporations not incorporated in Canada or not controlled by Canadians, and partnerships or trusts with non-Canadian majority ownership or control. Temporary residents and international students generally cannot purchase residential property under this prohibition unless specific exceptions apply (students who have filed taxes and met other conditions may be able to purchase in some circumstances).

Exemptions

The prohibition does not apply to: residential properties with more than three dwelling units (e.g., duplexes and triplexes are caught; four-plexes and larger are not), vacant land zoned for residential or mixed use, recreational properties in areas not designated by census, and purchases by refugees or protected persons. Properties outside Census Metropolitan Areas and Census Agglomerations are also exempt.

Tax implications of the foreign buyer ban

Non-Canadians who would otherwise be subject to the ban may face the Underused Housing Tax on any Canadian residential property they currently own. The two programs together — the prohibition on new purchases and the UHT on existing holdings — represent a significant tightening of the tax and legal environment for non-Canadian residential property ownership in Canada.