The budget proposes measures to try to reduce the demand for housing by making income from purchase-resale transactions taxable (the famous flips real estate) and prohibiting foreigners from acquiring residential property in the country.
The government is prohibiting people who are neither Canadian citizens nor permanent residents, as well as foreign companies, from acquiring property in Canada for the next two years. However, the measure does not affect cottages or other so-called recreational properties.
Exceptions will be made for refugees and students in the process of obtaining permanent residence, as well as for work permit holders in the same situation.
In another vein, Minister Chrystia Freeland intends to tax the profits derived from the rapid resale of a property following a buy-sell back transaction (flip real estate) as business income taxable at 100% and not as a capital gain, taxable at only 50%.
How much ?
64 million over six years
Revenue the government hopes to derive from taxing income from buy-sell transactions
A resale is considered prompt if it occurs within 12 months of purchasing the property.
Exemptions to the measure will be provided if the resale is hasty for a reason of health, death, divorce or change of employment.
Another measure, the government submits to sales taxes transactions surrounding promises to purchase new properties.
As it can take two to three years between the signing of the sale contract for a condominium and its delivery, it becomes possible to sell the purchase contract to a third party. “Right now GST may or may not apply,” reads the budget document. The government is making assignments of a sales contract taxable as of May 7.
Finally, the government will subject all mortgage lenders, including private lenders, to its national anti-money laundering requirements.