In an effort to slow the rising cost of housing in Canada, on September 11, 2022 the federal government proclaimed it will prohibit foreigners from purchasing homes for two years. Effective January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act will ban non-Canadians from buying residential property. As it stands now, this will impact the Canadian Employee Relocation Industry. A “non-Canadian” under the new law includes companies not incorporated under Canadian federal or provincial laws. A “non-Canadian” also includes companies that are incorporated under Canadian law, if that company is not listed on a Canadian stock exchange and is controlled by a company incorporated outside of Canada (such as a US company).
Under the premise of this law, Relocation Management Companies (RMCs) that are deemed to be non-Canadian will not be able to acquire residential properties in Canada as of January 1, 2023. Therefore, Cartus will not be able to offer Guaranteed Buyout Offer programs in Canada. Home sale assistance in Canada will need to be limited to Direct Reimbursement. Reimbursements of closing costs would remain non-taxable in Canada for Canadian residents. In addition, this legislation will prevent non-Canadian RMCs from offering BVO or Amended Sales programs. This may have tax consequences for transferees selling homes in Canada and relocating to the US.
Cartus is still gathering information on this topic. In certain circumstances, exemptions may be available to foreign individuals residing in Canada, such as those working under federally issued work permits. The Canadian Employment Relocation Council (CERC) is consulting with its partners, including the Worldwide ERC, to present to the Canadian government a solution that is sustainable for the relocation industry. However, we do not anticipate that any changes to this new law or related regulations will happen soon. Therefore, it is important that our clients begin considering potential policy changes where a guaranteed buyout program is currently offered and what changes may need to occur.
Cartus will continue to investigate this situation and see if there are any alternatives. Your account manager will be in touch with you regarding this new legislation and we will provide updates as further information becomes available.
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