Effective August 2, 2016, a new tax of 15% of fair market value
is payable by "foreign nationals" or "foreign
corporations" who acquire "residential property" in
the Greater Vancouver Regional District. This tax is in addition to
the current Property Transfer Tax, with the result that a foreign
purchaser will be paying between a 16% and 18% transfer tax on
residential property. The legislation, surprisingly, does not
provide for a transition period or grandfathering, and the tax
applies to any transaction registered on or after August 2.
Key issues to be aware of are:
A "foreign national" is
anyone who is not a Canadian citizen or permanent resident.
The definition of "foreign
corporation" is complex, but essentially is: (i) any
corporation not incorporated in Canada, OR (ii) a Canadian
corporation whose shares are not listed on a Canadian exchange and
is "controlled" by any of (A) a foreign national, (B) a
corporation not incorporated in Canada, or (C) a corporation whose
controlling shareholders are foreign nationals or foreign
corporations. "Controlled" is defined with reference to
the Income Tax Act (Canada).
"Residential property" is
relatively far reaching, and includes rental apartment buildings,
nursing homes and rest homes.
Three key exemptions from the basic
Property Transfer Tax will not apply to exempt the
15% additional tax namely:
Transmissions to surviving joint
Replacement/substitution of a
registered Trustee even if the beneficial ownership of the Trust is
not changing; and
Registration of an amalgamation of
These key exemptions will still apply with respect to the basic
Property Transfer Tax (of up to 3%) but will not apply with respect
to the additional 15%. Transmissions to executors and
administrators do not attract any Property Transfer Tax, including
the 15% tax. With respect to exempt transfers to a related person
of a principal residence, recreational property or family farm, the
related person has always had to be a Canadian citizen or permanent
resident, but the Property Transfer Tax will now be up to 18%
instead of up to 3% where the transferee is not a Canadian citizen
or permanent resident.
The legislation also introduces an anti-avoidance rule, steep
offence penalties and a lengthy time period for reassessment (six
years instead of the one year period, for the basic transfer tax),
specific to the 15% additional tax.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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