Over the past decade, federal and provincial governments across Canada have introduced a layered system of taxes targeting foreign buyers, vacant properties, and speculation in residential real estate. These measures affect non-residents purchasing property, some permanent residents, and even Canadians who own homes in high-demand markets without using them as primary residences. Understanding which taxes apply — and where — is essential before any real estate transaction.
Canada implemented a two-year ban on non-Canadian purchase of residential property that ran from January 1, 2023. This ban was extended and modified, prohibiting non-Canadians (foreign nationals, foreign corporations, and most foreign-controlled entities) from purchasing residential property in Canada's urban areas. Exemptions exist for Canadian citizens, permanent residents, protected persons, and some temporary residents meeting work or study criteria.
The ban applies to residential property with fewer than four units, including condos, townhouses, and detached homes. Penalties for non-compliance include fines of up to $10,000 and a court-ordered sale of the property. Real estate agents and lawyers involved in prohibited transactions also face penalties.
The federal Underused Housing Tax (UHT) is a 1% annual tax on the value of vacant or underused residential property owned by non-Canadian owners. Introduced for the 2022 calendar year and onward, it requires annual filing — even if no tax is ultimately owing — for most non-Canadian owners of residential property.
| Owner Type | Must File UHT? | Tax Owing? |
|---|---|---|
| Canadian citizen or PR (personally owned) | No — excluded owner | No |
| Foreign national (non-resident) | Yes — affected owner | Likely yes, unless exempt |
| Canadian corporation (public) | No — excluded owner | No |
| Canadian private corporation | Yes — must file | Depends on use |
| Partnerships / trusts | Yes — in most cases | Depends on beneficial owners |
Key exemptions from UHT include: the property is the primary place of residence of the owner, the owner's spouse, or a qualifying family member; the property is rented to arm's-length tenants for at least 180 days in the calendar year; or the property is a new construction not yet occupied.
British Columbia has the most extensive set of residential real estate taxes in Canada. The main measures are:
Alberta does not have equivalent provincial measures to BC's foreign buyer or speculation taxes. This makes Calgary an attractive market for international investors relative to Vancouver.
Ontario imposes a Non-Resident Speculation Tax (NRST) of 25% on the purchase price of residential property acquired by foreign nationals or foreign-controlled corporations anywhere in Ontario. The NRST was initially limited to the Greater Golden Horseshoe region but was expanded provincewide and the rate increased. Exemptions exist for protected persons and nominees under provincial immigration programs who commit to using the property as their principal residence.
When a non-resident sells Canadian real property, the buyer is required to withhold 25% of the gross purchase price (or a reduced amount if the non-resident obtains a CRA certificate of compliance) and remit it to CRA. This withholding is not a final tax — the non-resident files a Canadian tax return to report the capital gain and is entitled to a refund of any excess withholding. However, if the buyer fails to withhold, the buyer becomes personally liable to CRA for the unremitted amount.
Real estate tax obligations for non-residents and property investors have become significantly more complex. The interaction of federal, provincial, and municipal measures requires careful analysis of each transaction. Our tax professionals advise clients on UHT compliance, non-resident withholding, principal residence elections, and the tax implications of property acquisitions and dispositions. If you own or are considering purchasing property in Canada, contact us before signing.