Foreign Buyer Ban In Effect
The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians from buying residential property in Canada for 2 years starting on January 1, 2023.
The Government of Canada has passed a new law effecting foreign ownership of real estate. The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians and corporations controlled by non-Canadians from purchasing residential property in Canada for 2 years.
The Regulations will come into force on January 1, 2023. The Act and its regulations will be repealed after 2 years.
For more details, read the Regulations in the Canada Gazette.
The determination of residency is governed by Canada’s Immigration and Citizenship polices, but generally speaking a non-resident is someone who is only allowed to visit Canada for 6 months or less each year. If your goal is to live in Canada for more than 6 months a year, it is Important to note that owning real property in Canada does not strengthen one’s application for citizenship. Americans and other individuals seeking permanent residency or are encouraged to gain professional advice from an immigration lawyer.
Home Buying Process For Foreigners
In today’s electronic age it has never been easier for Americans and other foreigners to buy real estate in Canada. Technology has virtually eliminated the need to be physically present to search for and even buy real estate. With the amazing quantity and quality of resources available on the internet like video tours, aerial photos, and floor plans, shopping from abroad is really no different that shopping local. Often times there are also friends and family members in the local area that can assist in viewing properties. When it does come time to seeing homes first hand, access to Nanaimo and Vancouver Island has never been more affordable and convenient, with major transportation hubs and international airports located nearby.
Moving money for home purchase between Canada and the United States has been simplified with modernized money transfer processes, and the increasing number of financial institutions that are doing business on both sides of the Canadian American border and many other countries around the world. Exchange rates from the US dollar to Canadian dollar are also very favourable, which can represent a significant savings of tens of thousands of dollars off the purchase price of a home when the foreign currency exchange rates are taken in to consideration.
When it comes to actually making an offer to purchase, all the documents can now be signed digitally. Since 2014 it became legal in British Columbia to accept electronic signatures as original ink. Working with and experienced REALTOR® such as myself who has the knowledge, the tools and the technology readily available, you’ll be able to sign off on legal documents from anywhere in the world on your laptop, tablet, or even your smart phone. For those less tech-savvy individuals, scanning and emailing documents is also a very workable method to document signings.
Financing A Non-Resident Property Purchase
Americans and other non-residents can qualify for financing with Canadian lenders in mostly the same way that residents do, and can also take advantage of our low Canadian mortgage rates. Each lender will have their own specific lending requirements, but one can expect to have to meet certain criteria such as verifying income, credit ratings, bank statements, and producing letters of employment. The only significant difference non-resident buyer’s face is the minimum level of down payment required must be no less that 35% of the purchase price of the property.
To aid in the real estate purchase process it also helps considerably to open a bank account with a Canadian bank or lending institution. Foreign and US funds that are wired in to a Canadian account are easily verified for money tracking purposes, and to substantiate the funds are from legitimate sources. Most Canadian lending institutions will want to be able to trace the funds as far back as 90 days, and require the funds to be established in the account for at least 30 days prior to being applied towards a down payment or to be used for closing on the purchase of a property itself.
If you have taken out a mortgage to purchase the property you are also required to have the property covered against a loss due to fire. Even if there is no mortgage on the property it still makes sense to have the property coverage against damage due to flooding, wind, earthquake damage, and theft or vandalism. These coverage options are especially important to consider should the property be unoccupied for periods of over 24 hours, or occupied by tenants during the period of time that you as a non-resident are back in the United States or other home country. Make sure you insurance provider is well aware of your personal situation and they will ensure you have the right coverage for your particular needs.
When purchasing and owning a property in Canada, the taxes applicable for non-residents differ to those that that would apply Canadian citizens and taxpayers in BC. Real estate transactions are subject to Provincial Property Transfer Taxes that range widely from region to region across the Province, so be sure to check how they apply in the local area that you are interested in buying in. Goods and Service Tax can also apply to homes that are considered new construction. Annual speculation taxes can apply to people who do not pay income tax in BC. Annual property taxes are payable as well, and again can range widely depending on the local area. While there are tax exemption and rebate programs that are available to Canadian residents and taxpayers in BC, all foreign buyers including Americans would not be eligible to participate. You should always consult a tax professional for advise before buying or selling a property.
When selling a property, Americans and non-residents need to be aware that they are also then responsible to report any income or capital gains that were made while they owned the property. Taxable Canadian property includes single family residential, vacation or recreational property, bare land, and stratified or condominium type homes. The Canada Revenue Agency (CRA) requires that any individual buying from a non-resident must withhold 25% of the purchase price from the foreigner seller and remit that amount to the CRA. These funds are held back from the non-resident seller until they file a Canadian tax return the following year, or by filing a Certificate Of Compliance. The withholding taxes are used to cover any actual taxes owning and any overage amount is then returned to the seller.
As a non-resident you can also earn income and rent out your Canadian home. This is a legitimate financial strategy for the 6 or more months of the year that you will not be occupying the property yourself. Be aware though that this income must then be reported with the CRA and taxes paid accordingly. As a non-resident, you should always contact a tax accountant either in Canada or back in the United States to fully understand your tax implications prior to earning income from or selling off any real estate that you own in Canada.
For more information contact Nanaimo REALTOR® Peter Sterczyk today, and turn your Canadian real estate ownership aspirations in to a reality.