Canada’s new tax for foreign property owners could come back to bite you if you fail to file or file too late.
Foreign owners of residential investment properties are advised to stay on top of the new federal underused housing tax (UHT).
Recent changes to Canadian housing law can feel like a quagmire for foreign owners in Ontario. This is what you need to know.
Canada’s Current Tax Rate and How That Changes
Foreign real estate buyers, with a few exceptions, pay non-resident speculation taxes (NRST) to buy real estate they don’t live in. Paying foreign buyers tax (Ontario).
New this year is a vacant home tax in Toronto. It came into effect Jan. 1, 2022, adding another 1% for foreign buyers’ Toronto tax burden. Who owes Toronto’s vacant home tax.
Non-resident foreign buyers will also pay a 1% federal underused housing tax on properties they own in Canada. Do you owe the non-resident speculation (NRST) Ontario foreign buyers tax?
Other Taxes for Canadian Non-residents
On top of foreign buyer and vacant home taxes, non-residents may also get tapped financially for:
- Personal taxes on income you earn in Canada. Figure out if you’ll be taxed on Canadian income.
- Municipal taxes in the community where your investment properties are located. See property taxes for Toronto.
- Goods and services tax (GST) and/or harmonized sales tax (HST). GST and/or HST may apply when you buy a home from a builder or build a residential rental property. Qualifying for the new residential rental property rebate.
Find personal income tax rate for 2022 (Canada).
Who’s Excluded From Canada’s Underused Housing Tax
You won’t have to pay the federal UHT if you are or own:
- with some exceptions, a permanent resident
- corporation incorporated anywhere in Canada and listed on the Canadian stock exchange (designated under section 262 of the Income Tax Act)
- registered charity
- cooperative housing corporation
- a college or university
- a trustees of specified Canadian corporations, partnerships, trusts, mutual funds, REITs (real estate investment trusts) and SIFTs (specified investment flow-through accounts)
- and more.
Ask a tax accountant or financial advisor to verify if you, your company, or investments are exempt. See who else is exempt.
How Much You Pay for the UHT
Federal underused housing tax is scaled at 1% of the value of each residential property you own. Find a foreign buyers Toronto real estate lawyer.
How to File and When
Taxes are due on or before April 30, starting with 2023. File a separate Canada Revenue Agency form for every residential property you owned after Jan. 1, 2022. Go here to find the new UHT property declaration form once it’s posted.
Penalties and interest for failing to file are owed if you forget or try to avoid the tax. They’re high — the higher of $5,000 for individuals and $10,000 for corporations, or 5% of the amount owed plus 3% of the underused housing tax for every calendar month your payment is overdue.
Why You Need a Real Estate Lawyer
Foreign buyers of Ontario real estate need a licensed lawyer to complete the sales transaction. Axess Law reviews your draft or signed agreement of purchase and sale to ensure it includes essential clauses that protect your financial interests.
Your Axess Law real estate lawyer goes over the legal fine print in your contract’s terms and conditions. We negotiate with the seller’s lawyer if amendments are needed to change the terms, or extend the completion date to allow you to find favourable financing.
Even if a residential property sale doesn’t go through, your offer to purchase in Canada may be legally binding. Making firm price real estate offers can place you or your business at risk of forfeiting the good faith deposit. Who gets the deposit when a buyer backs out.
While your cancellation may be accepted by the seller, you could be financially liable for the gap between what you offered and what the final buyer paid, or expenses the seller incurred remarketing their property. Using your buyer’s right to cancel.
When the deal is confirmed, Axess Law’s in-person and remote real estate lawyers liaise with your bank, credit union, trust company, or private lender to witness your signature on the financing arrangements. When to get a private mortgage (web article).
We transfer title to the property to your name, and arrange for land transfer taxes and final adjustments like property taxes to be paid. You can add a spouse or family member before you complete the transaction, or after at any time. What’s involved in a title transfer.
Affordable Real Estate Lawyers, Anywhere You Are
Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
Hiring real estate lawyers near me.
Make Legal Appointments Online or By Phone
Make your own appointments online with our handy web form, or dial toll-free to 1-877-402-4277 (647-479-0118 in Greater Toronto Area) to find times that work for you. Our professional legal team can meet with you day or evening, anywhere in Ontario, by online video call. We have lawyers available 7 days a week, and can meet you in person at any of our conveniently located Greater Toronto Area or Ottawa law offices.
Axess Law has onsite parking, and easy transit access.