Buying a Plant or Commercial Property Through Your Company: Tax and Restrictions

Land transfer tax, and what the ban on non-Canadians buying residential property does and doesn't cover

Scott Tang, CPAUpdated 2026-11-032026 rules7 min read

Many foreign business owners hear that "Canada won't let foreigners buy homes" and assume their subsidiary can't buy a plant either. In fact, the ban applies only to residential property, not to commercial or industrial property. When a subsidiary buys a plant, warehouse or office building, the main issues are tax and financing.

Residential only

The federal ban covers residential property with 3 or fewer units; plants and office buildings are not included

13%

HST on taxable commercial property; an eligible registered buyer self-assesses it and claims back the creditable portion at the same time

Top Ontario land transfer tax rate (commercial property), calculated in tiers on the price

What the ban covers and what it doesn't

What you buy	Federal ban on residential purchases Foreign-controlled corporations also count as "non-Canadians"	Ontario Non-Resident Speculation Tax (NRST) Foreign nationals and foreign corporations
Detached houses, townhouses, condos and other housing with 3 or fewer units	✕Cannot buy (while the ban is in force; exceptions apply)	✕25% payable
Residential buildings with 4 or more units, bought as a whole	✓Generally outside the ban (based on the statutory definition)	◐Depends on the property type
A single condominium unit (condo) in a building	✕Treated as a single residence, regardless of how many units the building has	✕Generally payable
Plants, warehouses, industrial land	✓Can buy	✓Not payable
Office buildings, retail space	✓Can buy	✓Not payable

Detached houses, townhouses, condos and other housing with 3 or fewer units

🏠 Federal ban on residential purchases: ✕Cannot buy (while the ban is in force; exceptions apply)
🏷️ Ontario Non-Resident Speculation Tax (NRST): ✕25% payable

Residential buildings with 4 or more units, bought as a whole

🏠 Federal ban on residential purchases: ✓Generally outside the ban (based on the statutory definition)
🏷️ Ontario Non-Resident Speculation Tax (NRST): ◐Depends on the property type

A single condominium unit (condo) in a building

🏠 Federal ban on residential purchases: ✕Treated as a single residence, regardless of how many units the building has
🏷️ Ontario Non-Resident Speculation Tax (NRST): ✕Generally payable

Plants, warehouses, industrial land

🏠 Federal ban on residential purchases: ✓Can buy
🏷️ Ontario Non-Resident Speculation Tax (NRST): ✓Not payable

Office buildings, retail space

🏠 Federal ban on residential purchases: ✓Can buy
🏷️ Ontario Non-Resident Speculation Tax (NRST): ✓Not payable

The table above is only a general guide. The federal ban currently runs until January 1, 2027; whether it is extended after that depends on what the government announces. The ban also has exceptions, such as those based on location (outside metropolitan areas) and on status. A foreign-controlled corporation generally also counts as a "non-Canadian". If you buy qualifying residential property within the City of Toronto, there may also be Toronto's 10% Municipal Non-Resident Speculation Tax (MNRST) on top of Ontario's NRST; the two are assessed separately.

What taxes apply when you buy a plant

Land transfer tax
Ontario calculates it in tiers on the price, with a top rate of 2% for commercial property; within the City of Toronto, a separate municipal land transfer tax is also payable. It is paid on closing and is a cost of the purchase.
HST (13%)
When the buyer of taxable commercial property is an HST-registered company, the buyer generally self-assesses the HST. If the property is used primarily in taxable commercial activities and the paperwork is complete, the buyer can claim input tax credits at the same time, so in cash terms the two may offset. Whether the sale is taxable, whether the use is mixed and how to report it all need to be determined first; a seller that isn't registered for HST doesn't mean the sale is exempt.
Capital cost allowance (CCA)
Buildings can be depreciated for tax purposes at a set rate each year (higher rates apply to new non-residential buildings and manufacturing use); land cannot be depreciated. The purchase price needs to be properly allocated between land and building.
Annual property tax
Charged by the municipality based on the assessed value; payable whether the company uses the property itself or rents it out.

Which company should buy

Item	Operating subsidiary buys directly	A separate company holds the property (an option worth assessing)
Simplicity	One company, simple books	One more company, one more set of tax returns
Risk separation	If the business runs into trouble, the property is at risk too	Property and operations are kept separate
Selling later	Sell the property, or sell it together with the company	You can sell just the property company
Rent	Not applicable	The operating company pays rent to the property company; the rent must be reasonable
Financing and guarantees	The bank looks at the operating company's cash flow	Banks often require a guarantee from the operating company or the parent, so the benefit may not be as large as you'd expect

Where the money comes from

A commercial loan from a Canadian bank: the bank will look at the company's operating and credit history; a new foreign-controlled company is often asked for a parent company guarantee or a larger down payment.
A loan from the parent: subject to the thin capitalization rules (a 1.5:1 test; interest on the excess is not deductible — see the thin capitalization article in this series), and the interest rate must be reasonable.
Share capital from the parent: the simplest option; the money can later be taken back through a reduction of capital, based on paid-up capital (PUC) for tax purposes.

There is no single answer to whether you should set up a separate property company: financing, guarantees, tax and how you might sell later all need to be weighed together.

When you sell later

The subsidiary sells the property: first decide whether the sale is capital or business in nature. Property held long term for the company's own use or for rent generally produces a capital gain (half is included in taxable income); property bought in order to resell at a profit may be taxed in full as business income. Depreciation previously claimed on the building is "recaptured" on sale and calculated separately.
The parent sells the subsidiary's shares: if, at any time in the 60 months before the sale, more than 50% of the value of the subsidiary's shares came from Canadian real property and similar assets, the shares may be "taxable Canadian property" (TCP). A non-resident selling TCP generally needs to apply to the CRA for a certificate first (section 116); otherwise the buyer has to withhold. In this situation, a tax treaty usually doesn't exempt the gain from Canadian tax either, but this has to be determined under the specific treaty provisions and exceptions.

How Sheng Qian CPA can help

Structure before you buy
Who buys, how the money comes in, and whether to set up a separate property company — worked out together with thin capitalization and a future sale.
Sort out HST before closing
We first determine whether the sale is taxable and whether the HST can be fully recovered, then handle HST registration, self-assessment and input tax credits together, to avoid paying tax up front unnecessarily.
Ongoing work after the purchase
Allocating the price between land and building, annual CCA, rent and the T2. If you need a separate property company, it can be set up in advance through EasyU Incorporation: applications that qualify for Express incorporation are submitted the same day, and the certificate's timing depends on the registry; set the signing and closing dates only after the company is set up and the tax side is ready.

Your real estate lawyer handles the purchase agreement, the closing and the land transfer tax return; we work with them and provide tax advice.

Sources

Federal: Prohibition on the Purchase of Residential Property by Non-Canadians Act · Background reading (unofficial): Aird & Berlis – Extended to January 1, 2027
Ontario: Land transfer tax · Non-Resident Speculation Tax
CRA: Commercial Real Property – Sales and Rentals (GST/HST Memorandum 19.4.1) · Capital gains (T4037)
Income Tax Act: s.248 definition of taxable Canadian property (TCP)
Toronto: Municipal Land Transfer Tax and the 10% MNRST

Disclaimer

This article is general information only and is not tax or legal advice. For a real estate transaction, please consult a real estate lawyer and a CPA. The duration of the ban and the tax rates are as announced by the government at the time. Service fees are as set out in our written quote.