American real estate tycoon Sam Zell has stated that he will not be making any significant investments north of the border, as Canada’s tax rules make it unappealing to do so, the national press has reported.
Following a speech in Toronto last week, Mr Zell, founder of Equity Office Property Trust and Equity Residential Properties Trust, two of the largest commercial property concerns in the United States, indicated that he will instead work on building up his real estate portfolio in Mexico.
"It would be logical for our company to invest in Canada, but tax-wise, it's improbable," he revealed, according to the Globe and Mail.
Currently, Canada levies a withholding tax on the rental income of foreign real estate investors at a rate of 25%. A non-resident can elect to pay taxes as if they were a Canadian resident, although tax rate will vary widely depending on how the property is held, and in which of Canada’s 10 provinces and three territories the property is located.
Whilst Zell observed that foreign investment in Canadian real estate has increased markedly over the last three years, he noted that US investment in Mexico is three to four times higher.
"There are steps Canada needs to take if Canada wants to be part of the game, and I think it is going to be a very big game," Zell remarked.
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