What is the Non-Resident Speculation Tax?
The Non-Resident Speculation Tax (NRST) is a tax on the purchase or acquisition of an interest in residential property located provincewide by individuals who are not citizens or permanent residents of Canada or by foreign corporations (foreign entities) and taxable trustees.
Effective March 30, 2022, the government has increased the Non-Resident Speculation Tax rate from 15% to 20%. The previous NRST only applied to homes purchased in the Greater Golden Horseshoe Region by foreign nationals, foreign corporations, and taxable trustees. The NRST has now been expanded to apply provincewide. By upping the tax and widening its reach, it will dissuade speculative activity in the market from non-resident investors, thereby improving housing affordability for Ontario residents.
Who does it affect?
The tax affects individuals who are not Canadian citizens or permanent residents of Canada. However, the NRST will also apply to transactions where any purchaser on the title is foreign. This applies even if there are other Canadian residents on the title. Each of the purchasers in the transaction is jointly and severally liable for any NRST payable, so if you enter into an Agreement of Purchase and Sale to buy a property with a foreign entity and that foreign entity does not pay their NRST, you will be liable to pay the tax even if you are Canadian Citizen or Permanent Resident of Canada.
Types of Properties Subject to the NRST
The NRST applies to the transfer of “designated land”, which is land that contains at least one but not more than six single family residences.
It also applies on the value of the consideration for the residential property. If the land transferred includes residential property and land used for non-residential purposes, the NRST applies on the portion of the value of the consideration attributable to the residential property.
However, 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.
Although the tax applies to foreign individuals who are not permanent residents of Canada, there are also exemptions in the following situations:
- Nominee: Foreign nationals who are nominated under the Ontario Immigrant Nominee Program. They must also certify that they will apply to become a Canadian permanent resident.
- Protected person: Foreign nationals with refugee protection.
- Spouse: Foreign nationals purchasing property with a Canadian spouse.
If a foreign national meets any of the prior criteria, they are exempt from paying NSRT. However, the foreign national must designate the property as their primary residence for an exemption to qualify.
Where Can I Get Help?
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, family law, real estate law, estate law, employment law, health law, and tax law. For over 130 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge.
If you are concerned about whether the NRST applies to you, or would like help with a rebate or refund, contact us for a consultation.