Non-residents (foreign buyers) in Canada need to pay additional tax when purchasing real estate in Ontario, which is the "non-resident speculation tax", commonly known as the "overseas buyer tax". Generally speaking, 15% of the house price will be charged
1. What is the non-resident speculation tax?
The full name of non-resident speculation tax is Non-Resident Speculation Tax, or NRST for short. It is a 15% tax levied on foreign real estate buyers in Ontario. NRST applies to all eligible foreign buyers who settle on a home on or after April 21, 2017For example, for a property worth 1 million Canadian dollars in Toronto, foreign buyers need to pay NRST tax of 150,000 Canadian dollars.
NRST is usually paid through the buyer’s real estate attorneyIn addition, you also need to pay the Ontario provincial land transfer tax when buying a house in Ontario, and you also need to pay the applicable Toronto land transfer tax when buying a house in Toronto.Newly constructed or renovated homes in Ontario may also be subject to the federal Goods and Services/Harmonized Sales Tax (GST/HST)
2. Why is NRST mandatory in Ontario?
The Ontario government stated that it implemented the NRST in response to local concerns about the housing market and the rapid rise in housing prices.Its purpose is to discourage speculation in Ontario's real estate market, particularly by foreign buyersIntroducing the Ontario Budget on April 27, 2017, the Finance Minister said: “The government is concerned about non-resident investors – primarily purchasing homes in Ontario for speculative purposes."Interestingly, the province has not cited any data or statistics to support the NRST
3. Do I need to pay NRST?
Although the NRST regulations were passed on June 1, 2017, detailed regulations have not yet been finalizedHowever, all indications are that the wording of the rules broadly restricts foreign buyers, whether they buy directly, through a company, or through the help of a Canadian citizen or permanent resident to hold title
If you answer "yes" to each of the following three questions, you may be required to pay the NRST fee:
Are you a foreign entity or a trustee of a foreign entity (a "taxable trustee")?
Under Canadian immigration laws, if you are not a Canadian citizen or permanent resident, you are a "foreign entity"This is separate from whether you are a Canadian tax resident
Foreign entities include companies that are not incorporated in Canada (other than companies listed on the Canadian Securities Exchange), companies that are incorporated in Canada but are controlled wholly or partly by a foreign entity, and companies that are controlled directly or indirectly by a foreign entity for tax purposes
You are a taxable trustee if you are a foreign entity and hold title to the property for someone else (the actual owner)You are also a taxable trustee if you are a Canadian citizen, permanent resident of Canada or a corporation that owns a trust for the benefit of a foreign entity (there are exceptions for trustees of widely held investment vehicles such as real estate investment trusts)
If four people purchase a residential property in Ontario together and one of them acquires a 25% share of the property and is a foreign entity, the NRST will apply to 100% of the consideration transferredIn other words, the 15% foreign buyer tax cannot be exemptedAs a Canadian citizen buyer, you are jointly responsible with the foreign entity for paying the NRST
So if you are purchasing a property with someone other than your spouse, check whether they are a foreign entity, foreign corporation or taxable trusteeIf a joint purchase by another person is required to qualify for a loan, and that person is a foreign entity, an attorney should be consulted regarding the consequences.
Please note that NRST also applies to unregistered transfers of a beneficial interest to foreign buyers.This may occur, for example, if a Canadian citizen initially purchases a property without being required to pay NRST and subsequently gives a beneficial interest to a foreign entity without converting it into ownership
To assist in enforcing the NRST, the government has made it mandatory after May 5, 2016, to provide a statement of the buyer’s citizenship, immigration status and any beneficiary information.This statement must be submitted before closing on the house
Are you purchasing a residential property with less than 6 units?
The NRST applies to the purchase of residential properties containing more than one and less than six detached units, such as detached and semi-detached homes, townhouses and condominium units.
This also includes double, triple, quad, five and six strandsBuyers purchasing more than six units at the same time (e.g. multiple units in a condominium) should consult an attorney as to whether the NRST applies
NRST does not apply to multi-residential rental apartments, agricultural land or commercial land
Are you purchasing within the Greater Golden Horseshoe area?
The NRST applies to the Greater Golden Horseshoe region, which is the area surrounding the Greater Toronto Area and consists of the following towns: Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington and York
4. Are there exemptions?
YesThe following categories of people may be exempted:
1) Applicants who have been officially accepted by the Ontario Immigrant Nominee Program (OINP);
2) People who have obtained refugee status;
3) I am a foreigner, but I am the spouse of a Canadian citizen or permanent resident, or the spouse of 1) or 2) above