Part 3: Foreign Buyer Tax and New Amendments Explained
What is Foreign Buyer Tax?
Yet Another Tax!!
From Government of BC – Additional property transfer tax for foreign entities and taxable trustees
In addition to the property transfer tax, if you’re a foreign national, foreign corporation or taxable trustee, you must pay the additional property transfer tax on your proportionate share of a residential property’s fair market value if the property is within specified areas of B.C.
Your proportionate share is the percentage of interest that you’re registering on the title with the Land Title Office. For example, if you’re a foreign entity (foreign national or foreign corporation) acquiring a 70% interest in a property, you pay the additional property transfer tax on 70% of the residential property’s fair market value.
Tax amount and specified B.C. areas
If the property transfer is within the following areas, the tax rate is 20% on the fair market value of your proportionate share:
- Capital Regional District
- Fraser Valley Regional District
- Metro Vancouver Regional District
- Regional District of Central Okanagan
- Regional District of Nanaimo
The additional property transfer tax doesn’t apply to properties located on Tsawwassen First Nation treaty lands.
Transitional rules
If the property is located in the Capital Regional District, Fraser Valley Regional District, Regional District of Central Okanagan or Nanaimo Regional District and the property transfer is registered on or after February 21, 2018, you don’t have to pay the additional property transfer tax and your property can be registered at any time if:
- The property transfer is subject to a court order dated on or before February 20, 2018
- The property transfer is subject to an Order Nisi of Foreclosure dated on or before February 20, 2018
- The property transfer is subject to a written separation agreement under the Family Law Act made on or before February 20, 2018
- The property transfer is from the personal representative of a deceased’s estate to the beneficiary and the death of the deceased occurred on or before February 20, 2018
- The property transfer is to a surviving joint tenant when the death of the deceased occurred on or before February 20, 2018
Tax on the residential portion of the property
The additional property transfer tax applies on only the fair market value of the residential portion of a property located in the specified areas of B.C. There are three types of properties where this may occur:
- Property entirely classified as residential (class 1) by BC Assessment. You pay the additional tax based on the fair market value of the entire property
- Property classified as farm land by BC Assessment because it’s used for an owner’s dwelling or a farmer’s dwelling. You pay the additional tax on the value of the residential improvement plus 0.5 hectares of land
- Mixed class property that includes a residential property, such as a residential condo in a building (class 1) with commercial space (class 6). You pay the additional tax on the fair market value of the residential property (land and improvement) only
Exemptions
In some circumstances, you may be exempt from the additional property transfer tax if you’re:
- Exempt from property transfer tax
- A confirmed B.C. Provincial Nominee
- Acquiring a property on behalf of a Canadian-controlled limited partnership
Some transfers will still be subject to the additional property transfer tax even when exempt of the property transfer tax. These include:
- A transfer resulting from an amalgamation made under the Business Corporations Act, the Canada Business Corporations Act (Canada) or a similar provision of Canada or a province
- A transfer to a surviving joint tenant as a result of the death of a joint tenant
- A transfer to change the registered trustee(s) for reasons that do not directly or indirectly relate to a change in beneficiaries, class of beneficiaries or trust terms
The additional property transfer tax doesn’t apply to registration of trusts that are mutual fund trusts, real estate investment trusts or specified investment flow-through trusts.
B.C. Provincial Nominees
If you’re a foreign national individual who receives confirmation under the B.C. Provincial Nominee Program, you do not pay the additional property transfer tax if you claim the exemption.
To qualify for this exemption:
- You must be a confirmed B.C. Provincial Nominee when the property transfer is registered with the Land Title Office
- The property must be used as your principal residence
- The property transfer must be made to an individual
The B.C. Provincial Nominee is the individual named on a valid nomination certificate issued by the province. Family members, including a spouse or common law partner, are not exempt from the additional property transfer tax and must pay the tax on their proportionate share of the property if they’re also a foreign national.
Having a valid work permit, student visa, or being a candidate in the entrepreneurial immigration stream to permanent residency may not necessarily mean you’re a B.C. Provincial Nominee.
If your Confirmation of Nomination has expired, you must provide proof that you applied for permanent residency before the expiration date to be considered for the exemption.
You may claim this exemption only once. If you purchase another property, you must pay the additional property transfer tax. Qualifications for every exemption claimed are reviewed.
To claim the exemption, your legal professional must attach a copy of your B.C. Provincial Nominee confirmation letter together with the property transfer tax return.
Canadian-controlled limited partnerships
If you’re acquiring a property on behalf of a qualifying Canadian-controlled limited partnership, you may be exempt from paying additional property transfer tax if you’re one of the following:
- A general partner in a limited partnership
- A corporation, other than a foreign corporation, and a bare trustee of a trust where the beneficiaries include one or more general partners or limited partners in a limited partnership
- Note: For the purpose of this exemption, “general partner” and “limited partner” have the same meaning as section 51 or section 80 of the Partnership Act.
To qualify for this exemption, the property (land and improvements) transfer must be registered at the Land Title Office on or after June 1, 2020 and:
- Each general partner must be a Canadian citizen, a permanent resident of Canada or a corporation that’s not a foreign corporation
- Each general partner and each limited partner must be a resident of Canada for income tax purposes throughout the taxation year in which the transfer occurs
- The combined interest of all foreign limited partners in the limited partnership must account for less than half of the entitlement of all partners to share in the profits of the limited partnership
- The transferee’s interest in that residential property is a limited partnership property
- In respect of the transferee’s interest, no person has a beneficial interest in that residential property other than as a general partner or limited partner in that limited partnership
You may claim this exemption through the web-based property transfer tax return.
*!NEW NEW NEW!* Amendments to the Foreign Buyer Tax
As per Tony Spagnuolo – “Spagnuolo Updates to Federal Ban on Foreign Buyers”
In March the Government of Canada announced a series of amendments to the Foreign Buyer Ban. These amendments expand the exceptions to the regulations, are effective immediately, as of March 27, 2023, and are as follows:
- The Foreign Buyer Ban no longer applies to work permit holders. 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.
The Foreign Buyer Ban allows non-Canadians to purchase residential property for the purpose of development. Note that this will likely not include leasing or renting the property out to tenants or otherwise managing property as a rental property as part of a portfolio. Also, repairs, renovations and remodeling do not count as “development”, only expansions or remodels that are equivalent to constructing a new building or changing the use of a property.
The Foreign Buyer Ban no longer applies to Vacant Land. Non-Canadians can now purchase vacant land zoned for residential use and use it for any purpose.
The Foreign Control Threshold is now 10%. Previously, an entity was deemed foreign if non-Canadians owned 3% or more of it. With the amendment, the maximum amount of non-Canadian control is 10%.
If you want to do some further reading, check out the news release here: https://www.cmhc-schl.gc.ca/en/media-newsroom/news-releases/2023/amendments-prohibition-purchase-residential-property-non-canadians-regulations.
