Recent Canadian restrictions on real estate investments
As of January 1, 2023, the Canadian government has implemented significant restrictions on real estate investments through the Prohibition on the Purchase of Residential Property by Non-Canadians Act. This legislation, initially set for a two-year term and later extended until 2027, imposes substantial limitations on the purchase of residential property by non-Canadian individuals or entities, creating important implications for the principle of reciprocity between Canada and Italy.
Who is considered a “non-Canadian” under the law?
The legislation defines “non-Canadians” as falling into the following categories:
- Individuals who are not Canadian citizens or permanent residents
- Companies not incorporated under Canadian federal or provincial law
- Entities incorporated in Canada but controlled by non-Canadians
- Foreign companies and organizations, even if operating within Canadian territory
It is important to note that some exceptions apply, such as co-ownership with a spouse or partner who meets legal requirements, and purchases for diplomatic or consular purposes.
Which properties are subject to the ban?
The ban specifically applies to “residential properties,” defined as:
- Detached houses (up to three housing units)
- Condominium units and semi-detached homes
- Other properties classified as residential under the law
Excluded from the scope of the ban are properties located outside Census Metropolitan Areas (CMAs) and Census Agglomerations (CAs), as well as undeveloped land within those areas if intended for residential or mixed use. This means that Canadians may still invest in rural properties or small towns in Italy with a population below the thresholds set by the Canadian government.
Consequences of violations
In the event of a violation, provincial courts may order the forced sale of the property. Penalties apply not only to the buyers but also to anyone who knowingly participates in or facilitates a transaction that violates the law.
The principle of reciprocity and its implications for Canadian investors in Italy
In light of the Canadian restrictions, it is essential to understand how the principle of reciprocity affects Canadian citizens wishing to invest in Italian real estate. Under Italian law, foreign citizens may acquire property in Italy only if an equivalent right is granted to Italian citizens in the buyer’s country of origin.
The recent limitations imposed by Canada could therefore lead to a reassessment of the conditions applicable to Canadian citizens seeking to purchase residential property in Italy, especially in more desirable urban areas. To determine whether a specific investment falls under the principle of reciprocity, it is necessary to seek qualified legal advice, and we are here to support you if you wish to explore this path.
Provincial restrictions on agricultural land investments
In addition to federal restrictions on residential properties, several Canadian provinces impose specific limitations on the purchase of agricultural land by foreigners:
- Quebec: Authorization required from the Commission de protection du territoire agricole du Québec
- Alberta: Purchase limit of 20 acres
- Saskatchewan: Purchase limit of 10 acres
- Manitoba: Purchase limit of 40 acres
- Nunavut: Most land is collectively owned and can only be leased
- Prince Edward Island: Limit of 5 acres or 50 meters of shoreline for non-residents
Company formation and acquisition in Canada
Federal regulations
Foreign investors may establish or acquire control of Canadian companies, subject to certain conditions:
- For transactions exceeding CAD 1.5 billion (CETA threshold), a review procedure applies under the Ministry of Innovation
- All transactions are subject to mandatory notification, regardless of value
- The Canadian government reserves the right to review proposed investments for national security reasons
Provincial regulations
Regulations vary significantly across provinces:
- British Columbia: No restrictions for Italian citizens concerning citizenship, residency, or equity acquisition
- Nunavut: No formal restrictions, but partnerships with local stakeholders are essential for access to incentives and public contracts
- New Brunswick, Prince Edward Island, Nova Scotia, Quebec, and Newfoundland: No significant restrictions reported
Requirements for corporate officeholders
At the federal level, the Canadian Business Corporations Act requires that at least 25% of a company’s directors be residents of Canada. If there are fewer than four directors, at least one must be a Canadian resident.
This requirement also applies in Ontario and Newfoundland. Alberta mandates that at least 25% of directors be residents of the province. British Columbia, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Nunavut, Northwest Territories, and Yukon have no residency requirements for directors.
Bilateral agreements in force
Economic relations between Italy and Canada are governed by key bilateral agreements:
- Economic and Industrial Cooperation Agreement (in force since August 1, 1988)
- Convention for the Avoidance of Double Taxation with respect to Taxes on Income and the Prevention of Fiscal Evasion (in force since November 25, 2011)
How Studio Legale Internazionale Boschetti can assist you
In this complex regulatory landscape, Studio Legale Internazionale Boschetti offers specialized legal assistance to Canadian investors interested in the Italian real estate market. Our experts can:
- Analyze your specific case in light of the principle of reciprocity
- Verify the applicability of restrictions based on your province of residence in Canada
- Assist in structuring the investment to optimize tax treatment
- Prepare all required documentation to ensure legal compliance
- Provide full support throughout the property purchase process
Before proceeding with any real estate investment in Italy, it is crucial to address issues related to reciprocity in advance. Studio Legale Internazionale Boschetti will guide you through this process, ensuring that your investment complies with the laws of both countries.
Contact us for a personalized consultation based on your specific investment needs.
