Are you a foreign buyer of Ontario real estate? You could pay an extra tax to discourage real estate speculators. Foreign buyers in Ontario are subject to a non-resident speculation tax (NRST). You’ll get a break for the COVID-19 state of emergency, but only on residency requirements.
Provincial Tax Makes Housing More Affordable
Property speculation drives up the cost of housing, making it more expensive for GTA (Greater Toronto Area) residents. Foreign buyers who snap up deals to take advantage of favorable currency exchange rates, then flip for profit keep the real estate market churning. The GTA charges foreign speculators the NRST so locals can better afford housing.
What Properties Pay NRST
The NRST only applies to properties with one to six family residences, not raw land. Condos, townhouses, and multi-unit properties such as duplexes to six-plexes qualify, and if you buy multiple condos, you pay tax on every unit. NRST is retroactive for sales after April 21, 2017. It is completely separate from the Ontario land transfer tax and Toronto’s municipal land transfer tax. Who pays land transfer taxes.
Red flags when buying a condo.
Ontario Real Estate Exempt from Speculation Taxes
Rental properties with more than six units and agricultural, commercial, or industrial land are exempt from speculation taxes. The tax only applies to residential parts of a property. Say you buy a $895,000 resort with four cottages you rent to vacationers. You live full-time in a bungalow on the property. NRST would be due on the value of the bungalow, but not the resort or cottages. How to figure out what property is a principal residence.
Who Pays NRST Speculation Tax in Ontario
NRST applies to anyone who is not a Canadian citizen or permanent resident (PR), or has lost their PR status, and to taxable trustees, foreign corporations, or foreign entities. Property transfers may be exempt for buyers who are in a provincial nominee program or a protected person (refugee). Spouses of Canadian citizens, PRs, provincial nominees, and protected persons may also be exempt. See Who is a Spouse for NRST.
Define a Taxable Trustee
You are a taxable trustee if you administer a trust that has:
- at least one trustee that is a foreign entity, or
- a foreign entity that is a beneficiary but not a trustee.
Mutual fund, real estate investment trusts, or SIFT trusts are not eligible. All purchasers in a taxable trust are 100% liable for the NRST, regardless of their interest or if they are Canadian citizens or PRs. Contact an Ontario real estate lawyer if you have questions about your trust. Perils of investing in REITs.
Define a Foreign Corporation in Canada
Corporations are considered foreign if they:
- are incorporated outside Canada, or
- are incorporated in Canada but not listed on a Canadian stock exchange and controlled by a foreign national or corporation not incorporated in Canada.
Axess Law’s business lawyers can advise you on your corporate status.
What to Expect to Pay
Foreign buyers who signed an agreement to buy a home (or part interest) in the Greater Golden Horseshoe – from Simcoe, Brant and Peterborough Counties to Niagara Region and points in between – before March 30, 2022, owe a 15% NRST tax to the Province of Ontario. Ontario realtors can provide maps of affected communities, or scroll to this map for a list.
The NRST went up to 20% for buyers who signed agreements of purchase and sale anywhere in Ontario between March 30 and Oct. 24, 2022, and to 25% for offers made on or after Oct. 25, 2022. Calculate which tax applies to you.
Rebates for Foreign Nationals Who Live in Their Home
Even if you are charged NRST, you may qualify for a rebate as long as you made an offer to purchase a principal residence in the Greater Golden Horseshoe by March 29, 2022, and live in the home most of the time. You won’t qualify if you made your offer after that date.
Here’s how it works:
- You buy an Ontario home. Buy an income property in Ontario.
- You move in within 60 days of purchase and live in the home. The home is your principal residence in Canada.
- You apply for the NRST rebate using the Ontario Land Transfer Tax Refund/Rebate form.
Who Can Get a Rebate
Only foreign buyers who made an offer to purchase by March 29, 2022 and live in the Greater Golden Horseshoe qualify.
- Foreign nationals who become PRs within four years of buying a Greater Golden Horseshoe property.
- International students enrolled in 60% of a full course load (40% if you have disabilities) at an Ontario institution for at least two years. Approved institutions are listed in section 8 of Ontario Regulation 70/17, Ministry of Training, Colleges, and Universities Act. Read the regulation.
- Foreign nationals with a valid work permit employed full-time in Ontario (at least 30 hours a week or 1,560 paid hours) for 12 months or more since the purchase.
- You must hold the property yourself or with your spouse.
Who is a Spouse for NRST
Your spouse is the person you are married to, or have lived with in a common-law relationship for at least three years, or have natural or adoptive children with. Who owns property if you divorce outside Canada.
Divide foreign property if you divorce in Ontario.
Avoid Complicating Your Purchase
Be cautious about purchasing properties with others. You may lose the NRST rebate unless all purchasers are nominees or protected persons.
For instance, you purchase a home to live in with your spouse, who is a foreign national. You are a Canadian citizen, PR, nominee under the Ontario Immigrant Nominee Program or protected person (refugee). Her brother, who is also a foreign national but not a PR, nominee or protected person, has a part interest in the home and lives with you. You and your spouse would have qualified for the rebate if you bought the home together, but her brother does not.
Since all purchasers must be eligible, you must pay NRST.
Deadlines for NRST Rebates (Except PRs)
Foreign buyers have up to four years from the day the tax is due to apply for a rebate. A foreign national who becomes a Canadian PR (permanent resident) must apply within 90 days of receiving PR status (a maximum of four years and 90 days).
COVID-19 Impact on Tax Due Dates
Ontario has changed the date NRST is due to account for foreign buyers caught up in the initial COVID-19 travel and other restrictions. Buyers who signed an offer to purchase between Jan. 17 and July 24, 2020 can claim a rebate provided they occupied the home as a principal residence by Sept. 22, 2020. Instead of being required to move in within 60 days of purchase, the due date now is 60 days from the day the Ontario state of emergency was lifted.
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