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[BUYING AND SELLING REAL ESTATE IN CANADA - ONTARIO]
On February 4, 2024, the Federal Government announced its intention to extend the existing prohibition on the purchase of residential property by non-Canadians for an additional two years. As it was set to expire on January 1, 2025, the extension will result in the Act being in force to January 1, 2027. The announcement does not make mention of any amendments to the Act and its regulations. XVII. RESIDENTIAL PROPERTY FLIPPING RULE (ANTI-FLIPPING TAX)
Exemptions to the Anti-Flipping Tax Rule apply to Canadians who sell their home within 12 months due to life circumstances, such as disability, death, a new job, the birth of a child, or the breakdown of a relationship. The Federal Government has expressed that exemptions will be set in rules that will be presented for consultation in draft legislation. 1. UNDERUSED HOUSING TAX ACT Effective January 1, 2022, the Underused Housing Tax Act was introduced by the Government of Canada. This act requires individuals who are not Canadian citizens nor permanent residents of Canada who own residential property in Canada on December 31 of a calendar year, and which property is vacant or "underused" – to file an annual tax return and pay a tax of 1% of a residential property’s value (the “ UHT ”), annually. Under the UHT legislation, a residential property includes detached, semidetached, townhomes and similar separate residential dwellings. Generally, a residential property is considered underused if it is not continuously occupied for 180 days or more in a calendar year. Exemptions can include vacation property in rural areas held for personal use for a minimum of 4 weeks/year, and not suitable or accessible for year-round occupancy; property uninhabitable due to disaster or hazardous conditions; property undergoing major renovations; property held in the year of
On January 1, 2023, a new residential Anti-Flipping Tax Rule came into force in Canada. Under the rule, an individual who sells a residence within 12 months of acquiring it will be taxed on the profits from a "flipped property" as business income. Prior to the introduction of this Anti-Flipping Tax Rules, an individual who sold a home which was designated as their principal residence was exempt from paying taxes on any gains, and properties sold that qualified as capital property were taxed at the capital gains inclusion rate. No principal residence exemption is available to reduce the anti-flipping tax. A “flipped property” is defined as a housing unit located in Canada, or a right to acquire a housing unit located in Canada which was owned by the taxpayer for less than 365 consecutive days prior to its disposition. Notably, the right to acquire a housing unit and disposition would apply to an agreement of purchase and sale to buy a pre-construction home which is assigned to another purchaser.
ILN Real Estate Group – Buying and Selling Real Estate Series
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