Ontario Non-Resident Speculation Tax and Its Effects on Foreign Individuals

In the spring of 2017, the Ontario government implemented the Non-Resident Speculation Tax (NRST) to address the hot housing market and to help alleviate the rapid increase in home prices. The NRST requires foreign nationals, foreign corporations, and taxable trustees to pay a 15% tax on residential home purchases within the Greater Golden Horseshoe Region. This article will focus on how the NRST affects foreign nationals.

The NRST will be applicable to you if:

1. You are an individual who is not a Canadian citizen or permanent resident of Canada.
2. You are purchasing a residential property (detached or semi-detached house or a townhouse or a condominium unit) within the Greater Horseshoe Region and the date of the Agreement of Purchase and Sale was entered into after April 21, 2017.

If you answered yes to both questions, then subject to certain exemptions, the 15% NRST will be applicable on your purchase transaction. As a foreign national, you will be required to pay the requisite land transfer taxes (LTT and/MLTT) in addition to the NRST on the closing date.

Note that NRST is still applicable when a foreign national is purchasing residential property with other Canadian citizens or permanent residents. The entire value of the purchase will be subject to NRST (not just the foreign national’s share), and all individuals will be jointly and severally liable for any NRST payable if the foreign national does not pay the required tax.

The NRST will be equally applicable if a Canadian citizen or permanent resident purchased a residential property and then subsequently transfers it to a foreign national.

The Ontario government has provided a few situations where NRST is not applicable:

1. A foreign national is nominated under the Ontario Immigrant Nominee Program at the time of the purchase and has applied to become a permanent resident of Canada.
2. A foreign national obtains refugee protection at the time of the purchase.
3. A foreign national jointly purchases residential property with his/her spouse (married or common law), who is a Canadian citizen, permanent resident of Canada, nominee, or protected person.

If the above exemptions are not applicable, then you may be eligible for a NRST rebate if you hold the property exclusively or exclusively with your spouse, designate the property as your principal residence, and you:

• Obtain Canadian citizenship or permanent resident status within 4 years of purchasing the residential property; or
• Are a student who has been enrolled in a full-time program at an approved Ontario institution for at least 2 years from the date of the purchase; or
• Have legally worked full time under a valid work permit in Ontario for a continuous period of at least 1 year since the date of the purchase.

If you have any concerns regarding whether the NRST is applicable to your circumstance or you would like help with a rebate, please feel free to contact us.

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. Contact us online or at (416) 863-0125.