BEWARE!! FAQ on Foreign Buyers tax in BC

Moving to B.C. from the U.S.? Here are things you need to know about the foreign buyers’ tax

People moving to B.C. from the U.S. often ask us about buying property ahead of a move. The never-ending run-up in property prices across Canada and especially B.C. has created a political hot potato issue that has enacted some new laws around “foreign” buyers. The word foreign can have a few different meanings when it comes to people moving to Canada so I want to clear up some misconceptions about who does and does not fall into this category.

Currently in B.C., the foreign buyers’ tax applies to foreign nationals, foreign corporations or taxable trustees. For the purpose of this article, we are going to focus just on foreign nationals. These are neither Canadian citizens nor permanent residents of Canada. If a foreign national purchases a property that is located in one of the designated areas in B.C., an additional 20 per cent property tax is levied at the completion date. This B.C.-based tax might be replaced with a Canada-wide foreign buyers’ tax that the Liberal government has proposed for January 1, 2023, but that is a separate issue.

Many Canadians living in the U.S. and planning to move back to B.C. are under the assumption that they are foreign buyers just because they reside in the U.S. This is not true. If you are a Canadian citizen, you can purchase a property in Canada without being exposed to the foreign buyers’ tax if your intent is to move back to Canada.

There is another exemption for the foreign buyers’ tax. If you fall under the BC Provincial Nominee Program, you are exempt from the tax. This program is rather broad and covers various situations. Usually these jobs are designated as highly skilled in demand workers and experienced entrepreneurs.

What about those of us who are moving here waiting on a permanent residence (PR) approval? This is where it gets slightly different. Until your PR application is approved, you are technically not a permanent resident of Canada, and the foreign buyers’ tax would apply. However, if you receive your PR card within 12 months of the property registration date, you may apply for a refund of the foreign buyers’ tax. You do, however, need to move into the property and make it your primary residence within 92 days of it being registered with the land titles office. Current wait times for PR applications made outside of Canada are about 10 months. You can check this thread for up-to-date information on processing times.

There is another group of homeowners also affected by the recent changes. Those are people who own vacation homes in Canada jointly with a non-Canadian spouse. For these homeowners, they are exposed to the foreign buyers’ tax if the Canadian spouse dies first, hence leaving their 50 per cent ownership to the surviving non-Canadian spouse. This would trigger the foreign buyers’ tax on that 50 per cent share not based on what the homeowner paid for the property, but the current appraised market value. There are probably some workarounds for this tax by “disclaiming” the interest in the home and effectively pushing that to the estate of the deceased. But that is above my pay grade.

Navigating the constantly changing real estate rules for foreign buyers is not for the light of heart. The speculation/vacancy tax issue is another thorn in the side of many non-Canadian homeowners. Working with someone who is versed in all these rules/regulations is critical when making the move back to Canada. Don’t make the mistakes we made.