Region: OntarioAnswer # 0450
Non-resident Speculation Tax (NRST)
In 2017, the Ontario Government introduced the Non-resident Speculation Tax (NRST). The NRST is a tax on the price of homes bought anywhere in Ontario purchased by people who aren’t citizens or permanent residents of Canada or by non-Canadian corporations. This new tax is in addition to Ontario’s land transfer tax payable.
Effective October 25, 2022 this tax is 25%.
The geographical areas covered in the GGH include:
- 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 not applied to the purchase of homes where the Agreement of purchase and sale was entered into on or before April 20, 2017.
Real estate matters involve large sums of money and complicated legal issues. To get help, call a lawyer now.
Individuals and entities subject to the NRST
The NRST applies to foreign nationals, foreign entities and taxable trustees.
1. Foreign nationals: Individuals who are not Canadian citizens or permanent residents of Canada
2. Foreign corporations:
– Corporations incorporated outside Canada
– Corporations incorporated in Canada that are:
- controlled by a foreign national, or
- controlled by a corporation incorporated outside Canada; or
- corporations that if all the shares of the corporation which are owned by a foreign national or by a corporation incorporated outside Canada were owned by a particular person would be controlled within the meaning of section 256 of the Income Tax Act
3. Taxable trustees: A trust with at least one trustee that is a foreign entity, or if a beneficiary is a foreign entity.
Types of property covered by the NRST
The NRST only applies to the purchase of land with at least one and not more than six single family residences, such as:
- detached and semi-detached houses
- townhouses
- condominium units
- duplexes, triplexes, fourplexes, fiveplexes and sixplexes.
The NRST does not apply to the purchase of multi‑residential buildings with more than six units, or to agricultural, commercial or industrial land.
How is the tax calculated?
The NRST is calculated on the purchase price of the residential property. For example, if a single family detached home sold for $800,000, the NRST would be $120,000. If the purchase includes a residential property covered by the NRST as well as an excluded type of property, such agricultural land, the NRST only applies to the portion of the purchase price that relates to the residential property. For more information on the NRST, visit the Ontario Ministry of Finance website.
Underused Housing Tax
The Underused Housing Tax took effect on January 1, 2022. It is an annual 1% tax on the value of anyresidential property in Canada considered underused or vacant by the Canada Revenue Agency (CRA). While the tax usually applies to non-resident, non-Canadian owners, there are situations where it also applies to Canadian owners.
The penalties for failing to file anUnderused Housing Tax returnwhen it is due are serious:
- individuals are subject to a minimum penalty of$5,000
- corporations are subject to a minimum penalty of$10,000
For more information, visit the CRA.
New temporary law: Prohibition on the Purchase of Residential Property by Non-Canadians Act
The Government of Canada has passed a new law, the Prohibition on the Purchase of Residential Property by Non-Canadians Act. Beginning January 1, 2023, the Act prevents non-Canadians from buying residential property in Canada for 2 years. The ban applies to:
- individuals who are not Canadian citizens or permanent residents
- non-Canadian company owners
A residential property is defined as:
- buildings with 3 homes or less, and
- parts of buildings e.g. semi-detached houses or condominium units
Penalties:Any non-Canadian or anyone who knowingly assists a non-Canadian and is convicted of violating the Act will be fined up-to $10,000 and may be ordered to sell the property.
The ban does not apply to non-Canadians who are looking to rent.
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Get legal help
Real estate matters involve large sums of money and complicated legal issues. To get help, call a lawyer now.
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As an expert in real estate law with a comprehensive understanding of the Non-resident Speculation Tax (NRST) in Ontario, I aim to provide valuable insights and clarity on the intricacies of this tax and related concepts. My expertise is grounded in a robust knowledge base and a commitment to staying abreast of developments in real estate legislation.
The NRST, introduced by the Ontario Government in 2017, is a tax applicable to homes purchased in Ontario by individuals who are not citizens or permanent residents of Canada, as well as non-Canadian corporations. Effective October 25, 2022, the NRST rate stands at 25%, representing a substantial financial consideration in real estate transactions.
The geographical areas covered by the NRST in the Greater Golden Horseshoe (GGH) include prominent regions such as the City of Toronto, Regional Municipality of Peel, and Regional Municipality of York, among others. Importantly, the NRST is not applied to home purchases with an agreement entered into before April 20, 2017.
Identifying the individuals and entities subject to the NRST is crucial. The tax applies to foreign nationals, foreign corporations (both incorporated inside and outside Canada), and taxable trustees with at least one trustee being a foreign entity or having a beneficiary who is a foreign entity.
The types of properties covered by the NRST include land with one to six single-family residences, encompassing detached houses, townhouses, condominium units, and various multi-unit dwellings. However, it does not extend to multi-residential buildings with more than six units or agricultural, commercial, or industrial land.
Calculating the NRST involves applying the specified percentage to the purchase price of the residential property. For example, a $800,000 single-family detached home would incur a $120,000 NRST.
In addition to the NRST, the article touches upon the Underused Housing Tax, a 1% annual tax on the value of residential properties considered underused or vacant by the Canada Revenue Agency (CRA). It became effective on January 1, 2022, and carries significant penalties for non-compliance.
Furthermore, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, a new law passed by the Government of Canada, came into effect on January 1, 2023. This legislation restricts non-Canadians from buying residential property in Canada for a period of two years and imposes fines on violators.
To assist individuals in real estate transactions, the article recommends considering alternatives such as Home Deposits Now Guarantee, providing a stress-free option for obtaining a deposit without the need for traditional methods like certified cheques or bridge financing.
In conclusion, navigating the complex landscape of real estate transactions in Ontario requires a deep understanding of the NRST, Underused Housing Tax, and the new Prohibition on the Purchase of Residential Property by Non-Canadians Act. Seeking legal advice is emphasized throughout the article, underscoring the importance of professional guidance in real estate matters involving substantial sums of money and intricate legal considerations.
