Canada is expected to impose a nationwide federal tax on all overseas property investors in the near future.
Expected to be passed by the Canadian parliament, the federal tax will be the first of its kind and will penalise foreign real estate buyers by 1 per cent.
The Parliamentary Budget Office expects the tax to rake in revenues of $217 million in the first year.
The tax would apply to all residential properties owned by non-Canadians – including corporations and trusts – but homes, condos and town homes that are rented to tenants who are not immediate family members will be exempt.
Prime Minister Justin Trudeau and his Liberals campaigned on taxing offshore buyers.
The new federal tax will mimic what some provinces have already implemented.
British Columbia introduced a 15 per cent property transfer tax on foreign property buyers in downtown Vancouver in 2016, which has since increased to 20 per cent and has expanded to include more regions.
Ontario imposed a 15 per cent house and condo tax on foreign buyers in the GTA in 2017.
The taxes against overseas property investors have been challenged in the past, but unsuccessfully.
For example, University of British Columbia professor Henry Yu testified to the British Columbia Supreme Court: ‘The Foreign Buyers’ Tax can be directly linked to this long-standing legacy of racial discourse in B.C. and Canada, in particular how ‘blaming the Chinese’ has shaped and continues to shape public discourse.
However, the challenge was ultimately rejected by Justice Gregory Bowden, who wrote: ‘The view that foreign nationals significantly contributed to the escalation of prices of housing in Greater Vancouver is neither a stereotype nor a continuation of racist policies from the past.’
It does seem however that overseas property investors constantly renting their Canadian properties out to non-family members should be exempt from the new federal tax.