The Prohibition
As of January 1, 2023, the Federal Government of Canada (the “Government”) has made it harder for Foreign Nationals to purchase residential property (the “Prohibition”). The Prohibition specifically restricts non-Canadians from acquiring an interest in residential property, directly or indirectly. The Act defines a non-Canadian as “an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident.” The Act further defines non-Canadians for corporations that are incorporated non under the laws of Canada, or a province, or if incorporated under Canadian or provincial law “whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person a Canadian citizen or permanent resident.”
The Exemptions
The Act and Regulations provide for exemptions from the Prohibition in certain situations. For example, temporary residents who hold a work permit with 183 days, or more, of validity remaining and have not purchase more than one residential property may be exempt from the Prohibition. Further, individuals enrolled in an authorized study at a designated learning institution with the following criteria met may be exempt:
(i) they filed all required income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which the purchase was made,
(ii) they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made,
(iii) the purchase price of the residential property does not exceed $500,000, and
(iv) they have not purchased more than one residential property
Lastly, you may be exempt from the Prohibition if you hold a valid diplomatic passport, have refugee status, or you were granted temporary resident status for “safe haven.”
It is important to note that individuals who have signed contracts prior to January 1, 2023, that would otherwise be prohibited from purchasing residential property by the Act and Regulations, do not fall under the Prohibition. This is typically seen with new construction or pre-sale contracts signed by Foreign Nationals.
The Future
The Regulations also indicate that they will be repealed two years from the day in which they came into force. In other words, on January 1, 2025, the Prohibition may be revoked. It is important to understand that the timeline for repeal may change depending on current and future Federal Governments.
Question 1: Who is considered a non-Canadian under the Prohibition on purchasing residential property in Canada?
Answer: A non-Canadian, as defined by the Act related to the Prohibition, is an individual who does not meet any of the following criteria: a Canadian citizen, a person registered as an Indian under the Indian Act, or a permanent resident of Canada. Additionally, corporations that are not incorporated under the laws of Canada or a province, or if they are incorporated under Canadian or provincial law but their shares are not listed on a Canadian stock exchange with a designation under section 262 of the Income Tax Act, and are controlled by non-Canadian citizens or permanent residents, are also considered non-Canadians.
Question 2: What does the Prohibition restrict for non-Canadians regarding residential property in Canada?
Answer: The Prohibition restricts non-Canadians from acquiring an interest in residential property in Canada, either directly or indirectly. This means that individuals who are not Canadian citizens, permanent residents, or registered as an Indian under the Indian Act, as well as certain corporations not meeting specific criteria related to incorporation and control, are prohibited from purchasing residential property in Canada as part of this legislative measure. This act aims to address issues related to housing affordability and availability for Canadians.
Question 1: Who are eligible for exemptions from Canada’s Prohibition on foreign nationals purchasing residential property?
Answer: Exemptions apply to specific groups, including temporary residents with a work permit valid for 183 days or more, provided they haven’t bought more than one residential property. Students enrolled in designated institutions who meet certain tax filing and physical presence requirements, and whose property purchase does not exceed $500,000, are also exempt. Additionally, individuals with a diplomatic passport, refugee status, or granted temporary safe haven status are exempt. Contracts signed before January 1, 2023, by foreign nationals for new construction or pre-sales are not subject to the Prohibition.
Question 2: What are the criteria for international students to be exempt from the Prohibition on purchasing residential property in Canada?
Answer: International students can be exempt if they: filed all required income tax returns for the past five years, were physically present in Canada for at least 244 days in each of those years, the property’s purchase price is under $500,000, and they have not previously purchased a residential property in Canada. This exemption aims to facilitate students who are significantly contributing to the Canadian economy and society while pursuing their studies.
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