High Taxes Hamper Canadian CRE Investment

High taxes are an impediment to commercial real estate investors looking to invest in Canada, according to a new global study. The report by Luxemburg-based tax advisory service Taxand revealed that commercial property owners in Canada - where taxes are a massive 53 percent of commercial property rents - pay the highest taxes globally. The United States came in second place at 41 percent and Norway was in third place at 36 percent. Finland charges the least tax on commercial rental income at 8.99 percent.

“The alarmingly high total tax rate for Canada is largely the combined result of high levels of tax, which includes income and real estate taxes,” said Keith O’Donnell, head of real estate for Taxand. But, investors are turned off by the high taxes in Canada, said Gerry Divaris, vice president of Cushman & Wakefield property tax services. Divaris said that the Taxand study was no surprise, since investors have been complaining loudly that Canada is an expensive place to do businesses. In the Toronto market, for example, annual property taxes are at 1 percent while commercial properties are taxed at 4 per cent.

However, the Taxand study has attracted some backlash from industry experts who say the 53 percent figure may be overstated. “That figure may be high and we’ve asked for clarification on how they came at those numbers,” said Attorney David Stevens, who specializes in business law at Canadian tax law firm Gowlings.