On August 2, 2016, a new 15% property transfer tax for foreign home buyers kicked in. It only applies to home purchases in Greater Vancouver excluding the Tsawwassen first nations lands. For tax purposes this applies to any foreign national that is “not a Canadian citizen or permanent resident” including foreigners on a valid work/study permit in Canada. This tax applies to all transfers registered on or after August 2, 2016 regardless of when the purchase and sale initiated. This tax does not apply to non-residential property.
The goal of implementing this tax is to make housing more affordable for middle class home buyers in the Greater Vancouver area. More specifically at addressing the low vacancy rate and high real estate price. The revenue from additional tax would help fund housing, rental and support programs in B.C
However, many citizens have expressed their concern with this new tax for a few reasons:
- The tax came into effect with only 8 days’ prior notice, thus affecting many deals that were expected to close soon. If foreign buyers back out of these commitments, this could negatively impact locals that have already stepped into new commitments that depended on the sale of their properties.
- The property transfer tax focused on foreign nationals, not foreign money. This could negatively impact foreigners that are living and working in BC that have not yet received PR status or citizenship but wish to ultimately stay in Vancouver.
- Some realtors are suggesting ways to get around the new tax, such as transferring presale contracts to Canadian individuals or setting up a Canadian company.
We have yet to see the effects of this new tax on the housing market. For more information or to speak to a tax expert please contact us.