On Monday, July 25, 2016, the government of British Columbia announced that foreigners who buy residential property in the Vancouver area will have to pay an extra 15% on top of the current property transfer tax. This additional tax will apply to all buyers who are not Canadian citizens or permanent residents, including corporations that are not registered in Canada or are controlled by foreigners. The tax is expected to come into effect on Tuesday, August 2, 2016.
The new legislation also attempts to prevent foreign investors from avoiding the tax by closing loopholes, such as trust arrangements, and announcing significant non-compliance penalties.
The proposed legislation provides that individuals who fail to pay the additional tax or who participate in providing incorrect information to avoid the tax could be liable for fines of up to $100,000 and/or two years in prison. Meanwhile, corporations who fail to pay the additional tax or who participate in providing incorrect information could be liable for fines of up to $200,000. The Superintendent of Real Estate has issued a warning that these non-compliance penalties will be strictly enforced.
The changes to the property transfer tax regime are part of a series of reforms in the Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, 2016, which are in response to growing concern over the housing affordability crisis resulting from escalating home prices and low vacancy rates in the Greater Vancouver area. The changes also include dispensing with the self-governing council of realtors in favour of a government-appointed council and superintendent. A copy of the proposed legislation is available here.
Developers and purchasers should obtain legal advice before entering into any transactions that may be deemed to amount to avoiding the payment of property transfer taxes.
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