- Tuesday, 10 January 2023
Important changes to Canadian Real Estate, Double Edged Sword of Anti-Flipping Tax and Non-Canadian Residential Real Estate Purchase Prohibition. As of January 1st, 2023, 2 pieces of legislation have been put into law.
What you need to know:
Anti Flipping Tax on Residential Homes Purchases
This legislation will force homeowners to keep their homes for a minimum of 12 months (365 days) if they wish to use the primary residence tax exemption or be faced with their sale being taxed as business income rather than capital gains income. There are a few common-sense exemptions, namely; pregnancy, death, employment change, divorce, disability, etc.,
Prohibition on the Purchase of Residential Property by Non-Canadians Act
This is a full-blown prohibition on Residential Property Purchases by non-Canadians for two years. The Act carries a potential $10,000 fine for any non-Canadian or anyone who knowingly assists a non-Canadian who is convicted of violating the Act.
This will affect: Any non-Canadian as defined in the Prohibition on the Purchase of Residential Property by Non-Canadians Act.
It will NOT Affect: Any individual or corporation that falls outside of the definition of non-Canadian. This includes Canadian citizens, permanent residents, and persons registered as Indian under the Indian Act. Also included are corporations that are incorporated under the laws of Canada. There are further exemptions for temporary residents that satisfy certain conditions, and protected persons under s. 95(2) of the Immigration and Refugee Protection Act. A non-Canadian who intends to purchase residential property in Canada with a spouse or common-law partner that is not a non-Canadian, is also permitted to do so.
Why is this legislation being passed?
The intent of the Canadian government is to help make Canadian residential real estate more affordable for people living in Canada by limiting access to non-Canadians, and to more accurately tax the serial “House Flippers” who have been utilizing the “Primary residence” loophole in order to reduce the amount of taxes they paid after flipping a property.
How will this affect the average Canadian?
In general, the average Canadian does not need to be concerned, as the prohibition will not affect their ability to purchase property in Canada. Canadians who are looking to sell a property within 365 days of purchase, should be aware that they may be paying more in taxes as a result of the new legislation. Our suggestion is to contact an accountant or a financial professional to provide advice on taxes when selling a property.
Will this cause a significant change in the real estate market? (Speculative Opinion – Not Legal Advice)
Whereas the intent of the legislation is to make housing more affordable to Canadians, only time will tell whether or not the legislation will impact the Canadian market. If you’re unsure of the implications of this legislation on your transaction, the best path is to seek professional advice.
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