Updates to the Non-Resident Speculation Tax

By Mirjana (Mira) Markovic

On October 25^th, 2022 this Non-Resident Speculation Tax was further increased to 25%. Read the update here.

As part of its commitment to tackling Ontario’s housing crisis by prioritizing Ontario families and homebuyers, the government has increased the Non-Resident Speculation Tax (NRST) rate to 20 percent, to fight tax avoidance, and expanding the tax to apply provincewide effective March 30, 2022.

As a result, the NRST shall apply to the purchase or acquisition of an interest in residential property located anywhere in Ontario by individuals who are foreign nationals (individuals who are not Canadian citizens or permanent residents of Canada) or by foreign corporations or taxable trustees. The NRST applies in addition to the  Land Transfer Tax (LTT) in Ontario.

Prior to March 30, 2022, the NRST was a 15 percent tax on the purchase of an interest in residential property in the Greater Golden Horseshoe Region (GGH) of Ontario by individuals who are foreign nationals or by foreign corporations or taxable trustees.

The NRST applies to the transfer of “designated land”, which is land that contains at least one and not more than six single-family residences. Examples of land containing one single-family residence include a detached house, a semi-detached house, a townhouse, or a condominium unit. Examples of land containing more than one single-family residence include duplexes, triplexes, fourplexes, five plexes, and six plexes The NRST does not apply to other types of land such as land containing multi-residential rental apartment buildings with more than six units, agricultural land, commercial land, or industrial land.

The NRST applies to the total value of the consideration for the transfer of residential property if any one of the transferees is a foreign entity or taxable trustee. As an example: Tom, Lola, Ann, and Li buy a home as tenants in common each as to a 25 percent interest, with a value of the consideration of $1,500,000. Tom, Lola, and Ann are Canadian citizens, but Li is a foreign national. The NRST is applied to the full value of the consideration, resulting in an NRST payable of $300,000 (20% of $1,500,000.00). They do not pay NRST on just 25 percent of the value of the consideration. The NRST is not prorated to the interest acquired by the foreign national. Each transferee is jointly and severally liable for any NRST payable.

Exemptions from the NRST may be available to the following individuals:

1. Nominee Exemption (the foreign national is nominated under the Ontario Immigrant Nominee Program (nominee) at the time of the purchase or acquisition, the foreign national has applied or certifies that they will apply to become a permanent resident of Canada before the expiration of their nominee certificate, foreign national holds the property with any other transferees, those transferees must be individuals who are Canadian citizens, permanent residents of Canada, nominees or protected persons, and all transferees must certify that they will occupy the property as their principal residence;
   
   
2. Protected Person (Refugee) Exemption (the foreign national is a protected person on whom refugee protection is conferred under section 95 of the Immigration and Refugee Protection Act (Canada), the foreign national holds the property with any other transferees, those transferees must be individuals who are Canadian citizens, permanent residents of Canada, nominees or protected persons, and all transferees must certify that they will occupy the property as their principal residence;

    

3. Spousal Exemption (the foreign national is a spouse of a Canadian citizen, permanent resident of Canada, nominee or protected person, each spouse is a transferee named in the conveyance,the foreign national and their spouse hold the property with any other transferees, those transferees must be individuals who are Canadian citizens, permanent residents of Canada, nominees or protected persons, or the spouse of one of the transferees listed above, and transferees must certify that they will occupy the property as their principal residence; and
   
   
4. General Land Transfer Tax Exemptions (the deferral and cancellation of LTT for transfers between affiliated corporations also apply to the NRST.

 

The residential real estate lawyers at SorbaraLAW are available to assist you in assembling your NRST application should you require assistance. This article was written by Mira Markovic, a qualified real estate lawyer with SorbaraLAW. Mira can be reached at (519) 741-8010 ext.295.