Canada: Ontario Unveils A New 15% Land Transfer Tax And Expanded Rent Controls

On April 20, 2017 the Ontario government announced a set of measures, dubbed the Fair Housing Plan, intended to "help more people find an affordable place to call home, while bringing stability to the real estate market and protecting the investment of homeowners." The plan includes a proposed 15% tax on foreign real estate purchasers and an expansion of the current rent control rules. The principal features of these proposed measures are outlined below.

Non-resident Speculation Tax

  • The 15% tax applies, effective April 21, 2017, to the value of the consideration for the transfer (including a beneficial transfer) of a residential property in the "Greater Golden Horseshoe" if any of the transferees is a "foreign entity" or "taxable trustee."
  • The Greater Golden Horseshoe extends roughly from Simcoe County (i.e., Midland but not Gravenhurst) down to the Niagara Region and Haldimand County on Lake Erie, and from the Waterloo Region to Peterborough and Northumberland Counties.
  • Binding purchase agreements signed on or before April 20, 2017 will not be subject to the tax.
  • A residential property means a real estate property containing up to six family residences, and includes residential condo units (irrespective of the number purchased). Large residential rental apartment buildings are expressly excluded.
  • A foreign entity is a "foreign national" or a "foreign corporation."
  • A foreign national is an individual who is not a Canadian citizen or permanent resident.
  • A foreign corporation includes not only corporations incorporated outside Canada but also certain Canadian corporations. More particularly, a foreign corporation includes a Canadian-incorporated corporation the shares of which are not listed on a Canadian stock exchange and that is controlled "in whole or in part" by a foreign national or other foreign corporation. There is no guidance on what it means for a corporation to be controlled in part by a person. A foreign corporation also includes a Canadian-incorporated corporation that is "controlled" by a foreign entity within the meaning of section 256 of the Income Tax Act (Canada). Section 256 extends control beyond the strict de jure test of more than 50% of the votes. For example, a person who exercises de facto control over a corporation or owns shares representing more than 50% of the value of the corporation will be considered to control that corporation for purposes of section 256.
  • A taxable trustee is a Canadian citizen, permanent resident or corporation holding title in trust for foreign entity beneficiaries or a foreign entity holding title in trust for anyone.
  • The tax applies to a transfer of residential property if any of the transferees is a foreign entity or a taxable trustee. Thus, if a transfer of residential property is made to multiple transferees and only one is a foreign entity or taxable trustee, the tax will be imposed on the full value of the consideration for the property. Each transferee will be jointly and severally liable for the tax payable.
  • The tax does not apply to a purchase made as trustee for a mutual fund trust, a real estate investment trust or a specified investment flow-through trust. It is unclear whether this exemption is intended to apply to foreign REITs.
  • There are also narrowly cast exemptions for personal use by foreign nationals who receive confirmation under the Ontario Immigrant Nominee Program, for refugees and for foreign nationals who acquire property jointly with a spouse who is a Canadian citizen, permanent resident or other qualifying person. Rebates may also be available for foreign nationals who become Canadian citizens or permanent residents within four years of the acquisition, who are full-time Ontario students for two years following the acquisition or who legally work full-time in Ontario for one full year following the acquisition.
  • The legislation, when drafted, will contain anti-avoidance provisions, the scope of which is unclear at this point.
  • Although the Teranet system is not yet set up to collect the new tax, in the meantime all transfers registered after April 20 (and all reporting of beneficial conveyances) must contain a statement acknowledging that consideration has been given to the application of the new tax, and the tax must be paid directly to the Ministry of Finance (purportedly even before the legislation is drafted or passed).

Rent Control

  • The Fair Housing Plan would expand rent control to all private rental units, including those built after 1991 (which units were previously exempted). The measures would limit increases in rental costs to the rate posted in the annual provincial rent increase guideline, with the maximum increase capped at 2.5% annually. Landlords will be allowed to apply vacancy decontrol and seek above-guideline increases where permitted. When passed, the legislation enacting these changes will be effective as of April 20, 2017.
  • In an attempt to lessen the impact of the changes on the construction of new private rental units, the Ontario government proposes to introduce a targeted $125-million, five-year program to encourage the construction of new rental apartment buildings through a rebate of a portion of the development charges otherwise applicable thereto. However, this program may be limited to those areas that the Ontario government determines are most in need of new purpose-built rental housing.

Other Measures

The Fair Housing Plan contains a number of other measures, including the following:

  • introducing new legislation that, if passed, would empower municipalities to introduce a vacant home tax;
  • ensuring that property tax for new multi-residential apartment buildings is charged at a similar rate as other residential properties;
  • providing municipalities with tools to help "unlock development opportunities," such as imposing a higher tax on vacant land that has been approved for new housing;
  • tackling practices that may be contributing to tax avoidance and excessive speculation in the housing market such as "paper flipping," a practice that includes entering into an agreement to buy a residential unit and assigning it to another person prior to closing.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions