Real Estate

Trudeau government to close foreign-buyers loophole

  • Last Updated:
  • Oct 5th, 2016 5:59 pm
Member
Aug 11, 2016
498 posts
151 upvotes
alanbrenton wrote:
boyohboy wrote:
cbr663 wrote: Two major changes:

1. Effective October 17, 2016, all insured homebuyers must qualify for mortgage insurance at an interest rate the greater of their contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate. This requirement is already in place for high-ratio insured mortgages with variable interest rates or fixed interest rates with terms less than five years. Current rate is 4.64%.

2. An individual who was not resident in Canada in the year the individual acquired a residence will not—on a disposition of the property after October 2, 2016—be able to claim the exemption for that year. This measure ensures that permanent non-residents are not eligible for the exemption on any part of a gain from the disposition of a residence. The Canada Revenue Agency (CRA) will require a taxpayer to report the disposition of a property for which the principal residence exemption is claimed.
#2... does that basically mean having to pay tax on capital gain on RE for "non-resident"?
what's the definition of resident tho, does CRA check thoroughly?
The thing is, everyone can claim they are deemed residents when they have a house, health card (who gives these up?), bank account and driver's license, and biggest of all - family in Canada.

Interesting to follow how they amend the definition of deemed residents. Feds are trying to fix problem too quickly without really thinking about the policy's effectiveness.
This is nothing new, just the liberals way of washing their hands clean of the matter claiming they have done something about the "problem" while still pleasing their large former immigrant voting base who may have access to foreign funds mainly the south Asian, middle eastern and Chinese communities.
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Jul 3, 2011
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Thornhill
I don't know if it's the media or Ottawa trying to pull one over on the eyes of the public because the big news about these changes is not about getting strict with foreigners since they've done nothing that will deter that.

The foreigner buyer change requires that in order to be exempt from capital tax, the foreign owner must have had residential ties here in the year the property was purchased. On the face of it that may seem like a deterrent but it isn't. The definition of residential ties has not changed and where that includes having a family member live in the property, nothing in this revision stops the foreigner's child student or mother-in-law or anyone else who is in country from meeting that requirement.

While now requiring all mortgage borrowers to qualify on the same basis is a much needed change, that's not the real news either.

The really big news is the move they've made to catch speculators and flippers. It's brilliant!

Every tax payer will have to report the disposition of a sale even if it is their principal residence and they must report the purchase date and acquired price. This is where the tax cheats who buy pre-builds, assign for a profit and don't report will be caught or those who pretend to live in a property for a year but flip usually after renovating for a profit.

With that, I expect the condo market to cool significantly. Everything else - not much.
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Apr 21, 2004
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^ Nice post.

Does this mean prior to this, tax payers did not have to report property sales (principal or not)?

Are all flippers tax payers?

There is no minimum length of time required for a property to be considered principal residence, will this change?
http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... tml#N1029C


buy pre-builds, assign for a profit --> why will these have to be reported and where if one doesn't get in on the title?
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Jul 3, 2011
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Thornhill
Thank you for the compliment.

Up until now it was only a requirement to report the sale of a property that fell under the capital gains code.

The tax-cheating flippers/speculators particularly the assignors didn't have to answer the question about selling real estate but now that such a question will be included in the tax form, it must be answered and the code requires truthful answers. So if a tax-cheat lied and it was discovered they lied, they'll be on the most unforgiving end of a CRA lawsuit.

Every flipper is a tax-payer in the sense that the tax code requires tax filing compliance for those earning income in Canada. Even non-residents who had sold property are subject to a capital tax withholding amount either forcefully by the buyer's attorney or by CRA certificate.
alanbrenton wrote: ^ Nice post.

Does this mean prior to this, tax payers did not have to report property sales (principal or not)?

Are all flippers tax payers?

There is no minimum length of time required for a property to be considered principal residence, will this change?
http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... tml#N1029C


buy pre-builds, assign for a profit --> why will these have to be reported and where if one doesn't get in on the title?
Member
Nov 7, 2006
470 posts
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licenced wrote: I don't know if it's the media or Ottawa trying to pull one over on the eyes of the public because the big news about these changes is not about getting strict with foreigners since they've done nothing that will deter that.

The foreigner buyer change requires that in order to be exempt from capital tax, the foreign owner must have had residential ties here in the year the property was purchased. On the face of it that may seem like a deterrent but it isn't. The definition of residential ties has not changed and where that includes having a family member live in the property, nothing in this revision stops the foreigner's child student or mother-in-law or anyone else who is in country from meeting that requirement.

While now requiring all mortgage borrowers to qualify on the same basis is a much needed change, that's not the real news either.

The really big news is the move they've made to catch speculators and flippers. It's brilliant!

Every tax payer will have to report the disposition of a sale even if it is their principal residence and they must report the purchase date and acquired price. This is where the tax cheats who buy pre-builds, assign for a profit and don't report will be caught or those who pretend to live in a property for a year but flip usually after renovating for a profit.

With that, I expect the condo market to cool significantly. Everything else - not much.
Curious where you saw that? I must have missed it in the news
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Jun 11, 2005
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gzajay wrote:
licenced wrote: I don't know if it's the media or Ottawa trying to pull one over on the eyes of the public because the big news about these changes is not about getting strict with foreigners since they've done nothing that will deter that.

The foreigner buyer change requires that in order to be exempt from capital tax, the foreign owner must have had residential ties here in the year the property was purchased. On the face of it that may seem like a deterrent but it isn't. The definition of residential ties has not changed and where that includes having a family member live in the property, nothing in this revision stops the foreigner's child student or mother-in-law or anyone else who is in country from meeting that requirement.

While now requiring all mortgage borrowers to qualify on the same basis is a much needed change, that's not the real news either.

The really big news is the move they've made to catch speculators and flippers. It's brilliant!

Every tax payer will have to report the disposition of a sale even if it is their principal residence and they must report the purchase date and acquired price. This is where the tax cheats who buy pre-builds, assign for a profit and don't report will be caught or those who pretend to live in a property for a year but flip usually after renovating for a profit.

With that, I expect the condo market to cool significantly. Everything else - not much.
Curious where you saw that? I must have missed it in the news
It is what CRA announced.
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Jun 11, 2005
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fdl wrote: Could be the final dagger in Vancouver but not sure this will have much impact in Toronto where people confuse foreigners with immigrants who actually live in the homes they buy. As for people flipping, most were already paying tax. Then again this house of cards just needs a catalyst and some fear in the market and then who know. The government wants to try and architect a soft landing for housing which has never been done in history.
What is the concrete evidence you have that there are enough foreigners who buy Vancouver homes they do not live in to be problematic? Wasn't Andy Yan's study somewhat conclusive that empty SFHs are just as prevalent today as some years ago? Condos, maybe I would agree with you.
Member
Nov 7, 2006
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mudd_stuffin wrote:
gzajay wrote:
licenced wrote: I don't know if it's the media or Ottawa trying to pull one over on the eyes of the public because the big news about these changes is not about getting strict with foreigners since they've done nothing that will deter that.

The foreigner buyer change requires that in order to be exempt from capital tax, the foreign owner must have had residential ties here in the year the property was purchased. On the face of it that may seem like a deterrent but it isn't. The definition of residential ties has not changed and where that includes having a family member live in the property, nothing in this revision stops the foreigner's child student or mother-in-law or anyone else who is in country from meeting that requirement.

While now requiring all mortgage borrowers to qualify on the same basis is a much needed change, that's not the real news either.

The really big news is the move they've made to catch speculators and flippers. It's brilliant!

Every tax payer will have to report the disposition of a sale even if it is their principal residence and they must report the purchase date and acquired price. This is where the tax cheats who buy pre-builds, assign for a profit and don't report will be caught or those who pretend to live in a property for a year but flip usually after renovating for a profit.

With that, I expect the condo market to cool significantly. Everything else - not much.
Curious where you saw that? I must have missed it in the news
It is what CRA announced.
I did miss it. licensed is right, I think this will have a bigger impact than anything else announced today. How big is the question...
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Jul 3, 2011
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Thornhill
The Canada Revenue Agency (CRA) will require a taxpayer to report the disposition of a property for which the principal residence exemption is claimed. The CRA currently does not require this reporting where a property is eligible for the full principal residence exemption. The change means that, when a taxpayer disposes of a principal residence, the taxpayer will be required to provide basic information in the taxpayer’s income tax return for that year in order to claim the exemption. In addition, the CRA will be explicitly authorized to accept late-filed principal residence designations. More details are available on the CRA’s website. http://www.fin.gc.ca/n16/data/16-117_2-eng.asp
gzajay wrote:
licenced wrote: I don't know if it's the media or Ottawa trying to pull one over on the eyes of the public because the big news about these changes is not about getting strict with foreigners since they've done nothing that will deter that.

The foreigner buyer change requires that in order to be exempt from capital tax, the foreign owner must have had residential ties here in the year the property was purchased. On the face of it that may seem like a deterrent but it isn't. The definition of residential ties has not changed and where that includes having a family member live in the property, nothing in this revision stops the foreigner's child student or mother-in-law or anyone else who is in country from meeting that requirement.

While now requiring all mortgage borrowers to qualify on the same basis is a much needed change, that's not the real news either.

The really big news is the move they've made to catch speculators and flippers. It's brilliant!

Every tax payer will have to report the disposition of a sale even if it is their principal residence and they must report the purchase date and acquired price. This is where the tax cheats who buy pre-builds, assign for a profit and don't report will be caught or those who pretend to live in a property for a year but flip usually after renovating for a profit.

With that, I expect the condo market to cool significantly. Everything else - not much.
Curious where you saw that? I must have missed it in the news
Sr. Member
Jan 30, 2006
857 posts
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GiOBoY wrote: Yep, RIP to 20% YoY price gains... but I think we'll still manage to see 5-10% YoY gains going forward.
Don't really want to disappoint you but you are looking into 50℅ off in the next few years
Member
Aug 11, 2016
498 posts
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kashirin wrote:
GiOBoY wrote: Yep, RIP to 20% YoY price gains... but I think we'll still manage to see 5-10% YoY gains going forward.
Don't really want to disappoint you but you are looking into 50℅ off in the next few years
Are you high again? Doesn't take much to get you excited enough to make another one of your infamous 90% crash calls... Only 50% Cap gain is taxable, depending on ones tax rate, 1 million profit could imply a tax payable of approx $200k, I would gladly hand back 20 cents per every dollar of profit I make, don't really want to disappoint you... LoL
Last edited by Afv1234 on Oct 3rd, 2016 8:38 pm, edited 1 time in total.
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Apr 9, 2006
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kashirin wrote:
GiOBoY wrote: Yep, RIP to 20% YoY price gains... but I think we'll still manage to see 5-10% YoY gains going forward.
Don't really want to disappoint you but you are looking into 50℅ off in the next few years
Another comedian... always brings a smile around here with his doom and gloom. :lol:
What's the best credit card for...
Behold, true glory. #PCMasterRace!
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Apr 9, 2006
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licenced wrote: I don't know if it's the media or Ottawa trying to pull one over on the eyes of the public because the big news about these changes is not about getting strict with foreigners since they've done nothing that will deter that.

The foreigner buyer change requires that in order to be exempt from capital tax, the foreign owner must have had residential ties here in the year the property was purchased. On the face of it that may seem like a deterrent but it isn't. The definition of residential ties has not changed and where that includes having a family member live in the property, nothing in this revision stops the foreigner's child student or mother-in-law or anyone else who is in country from meeting that requirement.

While now requiring all mortgage borrowers to qualify on the same basis is a much needed change, that's not the real news either.

The really big news is the move they've made to catch speculators and flippers. It's brilliant!

Every tax payer will have to report the disposition of a sale even if it is their principal residence and they must report the purchase date and acquired price. This is where the tax cheats who buy pre-builds, assign for a profit and don't report will be caught or those who pretend to live in a property for a year but flip usually after renovating for a profit.

With that, I expect the condo market to cool significantly. Everything else - not much.
I can't imagine the federal government announcing this and leaving the residential ties definition unchanged.

If so, it will not stop foreigners from buying at all. :facepalm:
What's the best credit card for...
Behold, true glory. #PCMasterRace!
Sr. Member
Jan 30, 2006
857 posts
286 upvotes
GiOBoY wrote:
kashirin wrote:
GiOBoY wrote: Yep, RIP to 20% YoY price gains... but I think we'll still manage to see 5-10% YoY gains going forward.
Don't really want to disappoint you but you are looking into 50℅ off in the next few years
Another comedian... always brings a smile around here with his doom and gloom. :lol:
I'm really looking forward to see your beautiful smile when your dream house price goes bust
Sr. Member
Jan 30, 2006
857 posts
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Afv1234 wrote:
kashirin wrote:
GiOBoY wrote: Yep, RIP to 20% YoY price gains... but I think we'll still manage to see 5-10% YoY gains going forward.
Don't really want to disappoint you but you are looking into 50℅ off in the next few years
Are you high again? Doesn't take much to get you excited enough to make another one of your infamous 90% crash calls... Only 50% Cap gain is taxable, depending on ones tax rate, 1 million profit could imply a tax payable of approx $200k, I would gladly hand back 20 cents per every dollar of profit I make, don't really want to disappoint you... LoL
Huge chunk of potential homeowners will be out of this market because of stress test
Foreigners will be out very soon too
If you don't like 50℅ off then how about 75℅?

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