05/15/2024
Details on NRST
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, ask 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 any residential 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 an Underused Housing Tax return when 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 until January 2027. 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. For more information, visit Canadian Mortgage and Housing Corporation (CMHC).
EXCEPTIONS CONTAINED IN THE ACT AND REGULATIONS
The Act and Regulations provide exceptions, including for the following persons:
Temporary residents studying in Canada, if they:
are enrolled in a program of authorized study at a designated learning institution as defined in the Immigration and Refugee Protection Regulations, and
have filed income tax returns for each of the 5 taxation years preceding the year in which the purchase was made, and
have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year in which the purchase was made, and
have not previously purchased a residential property in Canada while the prohibition is in effect, and
purchase a property for a price not exceeding $500,000
Temporary residents working in Canada, if they:
hold a valid work permit or are authorized to work in Canada, and
have 183 days or more of validity remaining on their work permit or work authorization at time of purchase, and
have not previously purchased a residential property in Canada while the prohibition is in effect
Refugees, if they:
have been given refugee protection or are a protected person under the Immigration and Refugee Protection Act
Refugee claimants and individuals fleeing international crises, if they:
have made a claim for refugee protection in accordance with the Immigration and Refugee Protection Act, if that claim has been found eligible and referred to the Refugee Protection Division; or
have received temporary resident status in accordance with the Immigration and Refugee Protection Act based on humanitarian public policy considerations to provide a safe haven to those fleeing conflict
Accredited members of foreign missions in Canada, if they:
hold a passport that has a valid diplomatic, consular, official, or special representative acceptance issued by the Chief of Protocol of Canada
Non-Canadians spouses and common-law partners, if they:
purchase residential property in Canada with their spouse or common-law partner who is a Canadian citizen, a person registered under the Indian Act, a permanent resident or a non-Canadian for whom the prohibition does not apply.
Section 35 Rights – Indigenous People and Communities
The Regulations clarify that the prohibition doesn’t apply if it conflicts with the rights recognized and affirmed by Section 35 of the Constitution Act, 1982.
Section 35 recognizes and affirms the existing Indigenous and treaty rights of Indigenous peoples of Canada. These may include ownership rights to land, rights to occupy and use lands and resources, land to be set aside for First Nation use only, self-government rights and cultural and social rights.
Exceptions for Certain Types of Property
The Regulations include an exception for any residential property found outside of a Census Metropolitan Area (CMA) or Census Agglomeration (CA) as identified in Statistics Canada’s Standard Geographical Classification 2021.
Both CMAs and CAs are formed by 1 or more adjacent municipalities centered on a population centre, or the core.
A CMA must have a total population of at least 100,000 of which 50,000 or more must live in the core and a CA must have a core population of at least 10,000.
Q. Does the Prohibition on the Purchase of Residential Property by Non-Canadians Act apply to temporary residents who have studied in Canada and are now working after completing their studies, if they have been physically present in Canada for several years?
The Act and Regulations provide exceptions for the following temporary residents:
Temporary residents studying in Canada, if they:
are enrolled in a program of authorized study at a designated learning institution as defined in the Immigration and Refugee Protection Regulations, and
have filed income tax returns for each of the 5 taxation years preceding the year in which the purchase was made, and
have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year in which the purchase was made, and
have not previously purchased a residential property in Canada while the prohibition is in effect, and
purchase a property for a price not exceeding $500,000
Temporary residents working in Canada, if they:
hold a valid work permit or are authorized to work in Canada, and
have 183 days or more of validity remaining on their work permit or work authorization at time of purchase, and
have not previously purchased a residential property in Canada while the prohibition is in effect
The prohibition does not apply to temporary residents that satisfy all the conditions outlined in a) or b).
Effective as of January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) prevents non-Canadians from buying residential property in Canada for 2 years.
