Foreign buyers to pay an additional property transfer tax of 15%

Foreign nationals buying property in Vancouver are subject to an additional 15% property transfer tax as of August 2, 2016. According to the news release by the Ministry of Finance, the additional property transfer tax applies only to residential property and only in the Greater Vancouver Area.

The term “foreign buyer” includes the following entities:

1. Individuals who are not Canadian citizens or permanent residents, including stateless persons.
2. Foreign corporations that are not incorporated in Canada or incorporated in Canada, but controlled in whole or in part by a foreign national or other foreign corporation, unless the shares of the corporation are listed on a Canadian stock exchange.
3. Taxable trustees that are a foreign national or foreign corporation, or a beneficiary of a trust that is a foreign national or foreign corporation.

The additional 15% tax is calculated on the foreign buyer’s proportionate share of any applicable residential property transfer, even when the transaction may normally be exempt from property transfer tax. This includes the following transactions:

1. a transfer between related individuals
2. a transfer resulting from an amalgamation
3. a transfer to a surviving joint tenant
4. a transfer where the transferee is or becomes a trustee in relation to the property, even if the trust does not change

The exception to the above are trusts that are mutual fund trusts, real estate investment trusts or specified investment flow-through trusts.

Penalty for non-compliance

Each buyer is jointly and severally liable for this 15% tax. If one transferee does not pay the tax, the other transferees, including Canadians, must pay that transferee’s share of the additional tax. Where transactions involve Canadian citizens and permanent residents their identity is verified using official government issued identification. The social insurance number is collected and verified by viewing the SIN card and comparing the name or by viewing one of the following:

1. T4
2. CRA Notice of Assessment

Failure to pay the additional tax will result in a penalty of the unpaid tax plus interest and a fine of $200,000 for corporations or $100,000 for individuals and/or up to two years in prison. The penalties apply to anyone who participates in tax avoidance.

The information published in this article is for your convenience only and is not a replacement for legal advice.

Last updated: July 29, 2016