On January 1, 2023, Canada will enact the Prohibition on the Purchase of Residential Property by Non-Canadians Act (“the Act”).1 The Act prohibits direct and indirect purchase of residential real estate in Canada by anyone who is not a Canadian citizen, permanent resident, or is a foreign corporation for a period of two years. This includes U.S.-based Relocation Management Companies.
What does this mean for mobility services?
Mobility programs offering a Buyer Value Option (BVO) or a Guaranteed Buyout (GBO) home sale program will no longer be able to offer those programs unless their company is incorporated in Canada and is not controlled by non-Canadians. Companies that are not incorporated will no longer be able to offer these home sale programs. Homes currently under existing agreements in a home sale program in which liability was assumed before January 1, 2023, may not be impacted.
For those companies that are not incorporated, the only options for assisting employees with the sale of their home after January 1, 2023, will be through a direct reimbursement only or direct reimbursement with closing services only. It is important to note that due to the non-taxable status of home sale in Canada, offering a direct reimbursement in place of those managed home sale programs does not have a cost impact from a tax perspective.
Not only does the Act impact the ability to sell homes in Canada, it also impacts transferees’ ability to purchase residential property. Individuals moving into Canada who do not have Canadian citizenship or permanent residency will not be able to purchase residential property.
The Canadian Employee Relocation Council (CERC), the Worldwide Employee Relocation Council®, and many various industries have been actively soliciting the Canadian government to amend the Act. CERC has met with leaders regularly to educate them on the vast implications this will have. At this time, the government has not indicated that they are willing to make any amendments, and there are no further actions or meetings currently scheduled.
Aires is here to guide you through these changes and discuss alternative solutions if the Act is not modified or amended. Aires is currently monitoring all home sale transactions in Canada to ensure the new rules and regulations are followed for those properties currently under contract and those in process.
Please contact your Aires representative for additional assistance or information.
1 Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 235 [Act]. The Act is repealed on the second anniversary of its in-force date: see Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022, and other measures, 1st Sess, 49th Parl, (assented to June 23, 2022), ss 236 and 237.