Global Mobility and the Impact of Canada’s Two-Year Residential Property Prohibition
August 3, 2023
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As of January 1, 2023, Canada enacted a new Prohibition on the Purchase of Residential Property by Non-Canadians Act and accompanying Regulations. The prohibition places a two-year ban on the purchase of residential property in Canada by foreign homebuyers, albeit some exceptions exist, but for obvious reasons, this poses a big threat on the ability to relocate and transfer employees. For global mobility companies and individuals, the inability to purchase a home in Canada is particularly concerning and can hinder growth, diversity, recruitment, and retention goals.
Read on to learn how this act impacts foreign workers and the unintended consequences on global mobility programs.
To understand this prohibition, we need to start by clarifying who is considered a non-Canadian and what that means in regard to impact. According to the Prohibition on the Purchase of Residential Property by Non-Canadians Act, non-Canadians are defined as individuals who aren’t Canadian citizens, permanent residents, or status Indians. Under the act, non-Canadians are prohibited from purchasing residential property located in census metropolitan areas and census agglomerations. Even corporations that are not incorporated under Canadian provincial or federal laws are included in this prohibition.
But what exactly are the types of residential property referred to in this act? Well, in this case, condominiums, detached houses with more than three dwelling units, and semi-detached houses are banned from purchase by non-Canadians. Land that does not contain any habitable dwelling but is zoned as residential or mixed-use is also prohibited.
The Act and its regulations will also impact both direct and indirect purchases, such as leases, mortgages, and shares. To put this into perspective, this act prevents non-Canadian individuals in foreign corporations, who may own shares, from purchasing a residential property.
Foreign Worker Exception:
While this new act imposes the purchase of residential property by non-Canadians, there is an exception for foreign workers who:
- Hold a work permit or are otherwise legally authorized to work in Canada.
- Have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase.
- Have not purchased more than one residential property.
Foreign workers who hold a temporary resident status in Canada and were planning to purchase property in the next two years will need to ensure that they have the requirements needed to qualify for the exception.
Implications for Global Mobility:
However, this doesn’t mean that your program doesn’t have some big things to consider when it comes to the ability to relocate employees and remaining compliant. Global mobility companies and corporations that employ or recruit foreign workers will need to closely consider their relocation options and packages for Canadian-based assignments over the next two calendar years. Not every assignment may be impacted by this new act and, in some instances, an employee might qualify for the exception. Either way, this act will have an impact on global mobility in additional ways. For example:
Global mobility companies will need to be mindful of the timing of any purchase of residential property to ensure their foreign workers can demonstrate the prescribed period (just over six months) left on their work permits. This is an important piece of information to remember as workers will need to avoid relying on maintained status during a work permit renewal process, especially given the current work permit processing times in Canada and the possibility of delays.
Additionally, this prohibition can impact the recruitment and retention of top talent as foreign workers might be unwilling to rent over the next two years and may potentially abandon plans of calling Canada home. Not only does this ban impact the recruitment of new talent, but it has the potential to create unintended consequences for outgoing talent. For instance, non-Canadian RMCs (Relocation Management Company) are prevented from executing a guaranteed buyout, which essentially allows them to buy the home of a transferred employee and sell it to a third-party buyer.
Further exacerbating the prohibition’s impact on global mobility is the unavoidable additional pressure placed on the limited supply of short-term and temporary housing options. Moving is a huge stress on the employee, and the added limitations on housing can cause dissatisfaction with an assignment before it even starts. With the reduced availability of housing options, global mobility companies will face difficulties transferring employees in and out of Canada until the prohibition has ended.
The unintended consequences of this act are likely to be felt by foreign workers and the global mobility industry until significant amendments can be made. While the Canadian Employee Relocation Council (CERC) is working to understand the potentially negative implications of the prohibition on foreign talent and global mobility, employers should begin thinking about how this prohibition will impact their global mobility program. At a minimum, employers should consider reviewing their inbound Canadian policies and determining if they have any existing non-Canadian employees who were considering purchasing a home. Being well-versed in the prohibition’s language and creating strategies to address the challenges it will present can help your employees feel more confident about their relocation to Canada. Establishing clear communication will ensure they are aware of the new requirements and their rights for purchasing a home in Canada. This is a big ask with a ton of tax liability and compliance concerns, which is why Ineo has already baked a solution into our offerings; Ineo Tax Services provides expert-level review to corporate mobility programs and RMCs, meaning our tax professionals will look at each individual component from a tax compliance perspective and offer guidance on necessary revisions.
Ineo’s Tools and Platform Put to Use:
With Canada’s new prohibition in place for the next two years, global mobility companies and foreign workers alike will need to exercise special care and consideration when it comes to Canadian relocation assignments and home purchases.
Luckily Ineo’s experts and global mobility resources have your back! From Homesale management to transfer and assignment cost management, our team is equipped to help you determine the best strategy for your upcoming employee relocations to Canada. Contact us today to get started.
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