The response to this question is limited to commercial real estate that does not include a residential component. As of 1 January 2023 the federal government proclaimed in force the Prohibition on the Purchase of Residential Property by Non-Canadians. This prohibits foreigners (including Canadian entities such as companies with as little as 3% foreign ownership) from purchasing residential property until at least 31 December 2024. Residential property is defined to be a building with not more than three dwelling units and would exclude, for example, an apartment building with at least 4 units. However, residential property is defined to include land without a habitable dwelling that is zoned residential or mixed use. An acquisition of commercial real estate property with zoning that allows some residential use (even if there is no residential dwelling on the property), could still be caught by the two year ban on foreign acquisition.
At the federal level, the only other restrictions on foreign ownership are in the Investment Canada Act (“the Act”), and only apply to a foreign investor acquiring control of a Canadian business. Any transaction that triggers the relevant dollar threshold is subject to a pre-closing review where the Minister of Industry must be satisfied the transaction is “likely to be of net benefit to Canada.” The threshold amount depends on the nature of the entity purchasing the Canadian business. Some of the categories for review are described below.
In 2023, the review threshold for a WTO investor that directly acquires control of a Canadian business is CA$1.287 billion in enterprise value. The threshold level will be adjusted annually for growth in GDP.
In 2023, the review threshold for foreign state-owned enterprises that are WTO members is CA512 million in asset value.
The thresholds for investments by an investor who is not a “WTO investor” as defined in subsection 14(6) of the Act are CA$5 million in asset value for direct investments and CA$50 million in asset value for indirect transactions. These thresholds also apply to investments made by all non-Canadian investors to acquire control of a Canadian business that is a “cultural business” as described in the Act (generally any business that produces, distributes, or sells magazines, newspapers, video or music recordings, etc).
Finally, any investment of any size by a non-Canadian can be reviewed if the Minister believes it could injure national security.
British Columbia: 20 Additional Property Transfer Tax on Residential Properties in the Greater Vancouver Region, Capital Regional District, Fraser Valley, Central Okanagan and Nanaimo
There is an additional property transfer tax of 20% that foreign nationals, foreign corporations, and foreign taxable trustees pay in addition to the general property transfer tax on transfers of residential property in the Greater Vancouver Regional District, Capital Regional District, Fraser Valley, Central Okanagan and Nanaimo. By regulation, the tax can be applied to other areas in the province. There are no other foreign ownership restrictions in the province.
Ontario: A Non-Resident Speculation Tax in Metro Toronto
Following on the footsteps of Vancouver, Ontario imposed a tax of 25% of the fair market value of residential properties being transferred to non-residents. This tax came into effect on 5 May 2017. Unlike BC, this tax only applies to properties containing up to six units in a single title.
Alberta: No Foreign Buyer Can Own More Than 20 Acres of ‘Controlled Land’
Individuals who are not Canadian citizens or permanent residents, as well as foreign controlled corporations, cannot acquire interests in controlled land consisting of more than two parcels containing not more than 20 acres. “Controlled land” is land outside a city, town, or village. This restriction also applies to leases.
Saskatchewan: Non-Residents and Non-Canadian Owned Entities Cannot Own More Than 10 Acres of ‘Farm Land’
Non-residents of Canada and non-Canadian owned entities cannot own more than 10 acres of farm land. There are limited exceptions to this rule. This restriction covers all types of land interests, including leases. Under the regulations, “farm land” means real property that is situated outside a city, town, or village. It does not include land used for extracting, processing, storing, or transporting minerals or land used primarily for sand and gravel extraction.
Manitoba: Non-Canadians and Non-Canadian Owned Organizations Cannot Own More Than 40 Acres of ‘Farm Land’
Non-Canadian citizens, organizations at least partly owned by non-Canadians, and publicly traded companies and other organizations whose ownership is open to non-Canadians cannot own more than 40 acres of farm land unless an exemption is granted by the Manitoba Farm Industry Board. This restriction applies to most types of interests, including leases. “Farm land” means real property outside a city, town, village or hamlet that is reasonably capable of being used for farming. Like Saskatchewan, the Manitoba legislation exempts land used for the purpose of extracting, processing, storing, or transporting minerals.
Québec: Non-Quebec Residents Cannot Own More Than 4 Hectares (10 acres) of Land
Non-residents of Québec and non-Québec resident entities are not allowed to acquire more than 4 hectares of land below the 50th parallel or in a zone designated as an agricultural zone except with the authorization of the Commission de protection du territoire agricole du Québec. “Farm land” is defined as any land used for agricultural purposes having an area of at least four hectares. This restriction applies to leases as well.
Prince-Edward Island: Non-Residents Cannot Own More Than 5 Acres and Cannot Have a Shore Front of More Than 165 Feet
Non-residents of PEI as well as corporations cannot own land in excess of 5 acres and cannot have a shore front of more than 165 feet. This restriction applies to all land and most types of interests, including leases. The restriction applies to all corporations as opposed to only foreign-owned ones.
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There is no requirement for a permanent establishment. However, if a foreign corporation is purchasing land proof of corporate existence must be provided and if the corporation is carrying on business it must be extra-provincial registered in the appropriate province and have an address for service. Extra-provincial registration costs less than CA$1,000.
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The main types of corporate vehicle are:
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Public or Private Corporations have share capital and liability is limited to the share capital.
ULC or Unlimited Liability Corporations have articles that provide that the shareholders are jointly and severally liable for the debts and liability of the company.
Partnerships are not taxpayers and income or losses are allocated to the partners.
Limited Partnerships are a statutory creation and are created by filing in the appropriate province. The limited partners are not liable for the debts or obligations of the partnership unless they participate in the management of the business. For this reason, Limited Partnerships normally have a corporation which acts as the general partner to manage the business.
An LLP allows the Limited Partners to participate in management of the business without losing the limited liability except for the negligent or wrongful act or omission of a Limited Partner. Originally, these were only available to professional partnerships such as lawyers or accountants but their use is now generally available in some Provinces such as British Columbia.
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There are no minimum capital requirements.
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General guidelines of costs are set out below for different types of entities
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Incorporation of a company normally takes five to ten days but for a small fee can be expedited and completed in one day.
Most general partnerships have no filing requirements and are operative as soon as the partners agree on terms.
Limited Partnerships and Limited Liability Partnerships generally require a filing in a corporate office to become operative. This can take a few days and can be done on an expedited basis for a few hundred dollars more when required.
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This varies based on jurisdiction of formation.
British Columbia limited companies (including unlimited liability companies) must have at least one director, and a public company must have at least three directors. British Columbia has no director residency requirements.
Any person, including a corporation, who meets certain criteria may incorporate a BC company.
A BC company must hold its first annual general meeting not more than 18 months after the date on which it was recognized. Subsequent annual general meetings must be held at least once in each calendar year and not more than 15 months after the annual reference date for the preceding calendar year.
Within two months after each anniversary of the date on which the company was recognized, every company must file with the registrar an annual report containing information that is current to the most recent anniversary.
A British Columbia partnership is an unincorporated form of business association:
Unlike corporations, with certain exceptions the general view is that a partnership is not a legal person or an entity with an existence that is separate and distinct from that of its partners.
No formal written agreements are necessary (although, depending on the purpose of the partners, one is advisable).
Partnerships are not required to file annual returns, hold annual meetings, elect directors or observe any mandated governance procedures.
Limited partnerships are primarily employed for raising capital, particularly where significant potential liabilities surround a new business enterprise, and for their tax benefits. They are often used in real estate investment projects, in the film industry, in venture firms, in restaurants and in other businesses focusing on a single or limited term project.
Limited partnerships provide a number of benefits to their members, including:
A typical modern limited partnership will have one general partner, which has been incorporated for the sole purpose of acting as general partner and which has no assets other than its interest in the limited partnership and assets which it holds as nominee for the limited partnership, and one or more limited partners.
A limited liability partnership or LLP is a modified form of partnership. The formation of a limited liability partnership begins with either an existing general or limited partnership or a new partnership that is created for the purpose of establishing the LLP. As with all partnerships, there must be:
(1) a business that is
(2) carried on in common by two or more persons with
(3) the object of profit.
In addition, a written partnership agreement should be in effect. In BC, a partner of an LLP can be an individual, a company, another corporate entity or a limited partnership. Once a partnership is in place, the partners of the partnership would then apply for registration as a limited liability partnership.
Unless otherwise provided for in a partnership agreement, each partner has the full right and equal entitlement to participate in the management of the partnership.
The duties and obligations that partners owe to each other in a partnership are established under common law, the provisions of the legislation and the provisions of any partnership agreement.
There are three exceptions to the limited liability available to partners of a LLP. They are:
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Depends on jurisdiction of registration. Costs for BC only shown below (government filing fees only):
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Please refer to the taxes topic on the topic overview page for Canada.
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Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
There is no requirement for a permanent establishment. However, if a foreign corporation is purchasing land proof of corporate existence must be provided and if the corporation is carrying on business it must be extra-provincial registered in the appropriate province and have an address for service. Extra-provincial registration costs less than CA$1,000.
Last modified 22 Mar 2024