On April 20, 2017, the Government of Ontario launched the Ontario Fair Housing Plan, designed to stabilize rising housing prices and increase the supply of homes in the province by cooling off demand.
As part of the plan, a new property tax called the Non-Resident Speculation Tax (NRST) came into effect April 21, 2017, hoping to address concerns about foreign buyers speculatively purchasing residential real estate in the Toronto area and rising real estate prices. The NRST levies a 15% tax on foreign individuals who purchase or acquire an interest in residential property in the Greater Golden Horseshoe Region (GGH).
The GGH includes the following geographic areas:
- City of Barrie
- County of Brant
- City of Brantford
- County of Dufferin
- Regional Municipality of Durham
- City of Guelph
- Haldimand County
- Regional Municipality of Halton
- City of Hamilton
- City of Kawartha Lakes
- Regional Municipality of Niagara
- County of Northumberland
- City of Orillia
- Regional Municipality of Peel
- City of Peterborough
- County of Peterborough
- County of Simcoe
- City of Toronto
- Regional Municipality of Waterloo
- County of Wellington, and
- Regional Municipality of York.
The NRST is an additional tax on top of the Land Transfer Tax in Ontario which applies to all property purchase transactions in Ontario and the Municipal Land Transfer Tax which applies to all property purchase transactions in Toronto.
Properties subject to the NRST
The NRST applies to transfers of land that contains at least one and not more than six family residences. This includes condominiums, where each unit is considered a single-family residence as well as multiplexes with six or fewer residential units.
The amount payable is 15% of the value of consideration received for the residential property. If the land transferred has both residential and commercial uses, the NRST is payable only to the value of the residential portion of the consideration paid.
The tax applies to all applicable properties that close on or after April 21, 2017.
Entities Subject to the NRST
The NRST applies to the full value of consideration paid if any of the purchasers or persons acquiring interest in the property is a foreign individual, a foreign corporation, or a taxable trustee.
A foreign person in under Canadian Law is someone who is neither a Canadian Citizen nor a Permanent Resident (someone who has gained Permanent Resident status and not lost it under section 46 of the Immigration and Refugee Protection Act).
If a corporation does not meet the Income Tax Act (ITA) definition for Canadian Corporations, it is a foreign corporation and subject to the NRST. A foreign corporation is one that:
- Is incorporated outside of Canada – under s89 of the ITA– a corporation incorporated in Canada or one that has been resident in Canada since June 18, 1971. Though residency is not defined in the ITA, there are deeming rules under 250(4) and under common law, a corporation is resident in Canada if its central management and control are located in Canada.
- is controlled in any manner whatsoever by a foreign entity – Under section 256 of the ITA, a corporation can be foreign even if it is incorporated in Canada and resident if it is controlled in any manner whatsoever by a foreign national or a foreign corporation.
A trustee that is one of the following:
- trustee of a trust where at least one trustee is a foreign national or corporation
- a trustee of a trust holding title in trust for foreign national or corporation
The Land Transfer Tax Act uses conveyance broadly and captures assignment of land within it. Because of this, it applies to broadly to any foreign entity that acquires an interest in applicable residential property, including foreign buyers who acquire property intending to assign it.
Parties Exempt from Paying the NRST
- A nominee under the Ontario Immigrant Nominee Program at the time you purchase your property and you’ve applied or certified that that you will apply to become a permanent resident of Canada
- A protected person under the Immigration and Refugee Protection Act
- A spouse of a Canadian citizen
To qualify for the exemption, you must fall into at least one of the 3 categories listed above, and certify that you will live in the home as your primary residence.
Parties Who May Be Entitled to Full NRST Rebate
You may be entitled to have the full NRST tax returned in the following situations:
- If you are a foreign national but become a permanent resident within four years of purchasing your property
- If you are an international student who has been enrolled full time (60% of a full course load if the individual has no disability and 40% if the individual has a disability) in an approved institution located in Ontario. To see if you qualify, visit here
- If you are a foreign national and have worked under a valid work permit in Ontario for a continuous period of one year since the date Full-time means an employment position that requires no fewer than 30 hours of paid work per week over a 12 month period and no fewer than a total of 1,560 hours of paid work over that period.
To qualify for a rebate, you must exclusively hold title to the property, with no one else except your spouse. It must also be your principal residence beginning no more than 60 days after the acquisition.
This article is for general information and does not constitute legal advice. If you have specific questions, or are involved in a real estate transaction and believe that the NRST is payable, give us a call. We can help plan your transaction to minimize immediate and future tax implications.