Kancelaria Malicki Sanchez informuje: Non-Resident Speculation Tax: Rule Change, Exemptions and Rebates

Non-Resident Speculation Tax (NRST) is a tax paid on the purchase price at the time of transfer. Much like Land Transfer Tax, it is automatically deducted/paid at the time of closing. However, unlike Land Transfer Tax, which applies to all eligible land transfers in Ontario, this tax only applies to non-residents and foreign nationals; Canadian citizens and permanent residents do not pay this tax.

Before March 2022, if you were a non-resident of Canada, who wanted to invest in a residential property in Ontario, you were exempt from having to pay a Non-Resident Speculation Tax (NRST) if your property was not located in the Greater Golden Horseshoe. If you were investing in applicable property within the Greater Golden Horseshoe region, the NRST was 15% of the purchase price. However, this changed on March 29, 2022.

The government made a rule change wherein now the NRST applies for eligible properties in all of Ontario and the NRST is now 20% of the purchase price.

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People who are in Canada on work visas, or foreign investors, will now be thinking twice about investing in property in Ontario.

With this new rule change, a million-dollar home in Ontario will be subject to the NRST of $200,000.00, as well as the regular land transfer tax (LTT) that is due upon transfer. This is a substantial amount that non-Canadians must pay to invest in the Ontario real estate market, and many are not willing to do so.

However, there is hope for people whom the NRST applies to. Some may be exempt from this tax altogether, and some may successfully be able to receive a rebate of this tax.

Exemptions of the NRST are made for people who:

  1. Purchase non-qualified land such as multi-residential rental apartment buildings with more than six units, agricultural land, commercial land, or industrial land;

  2. Meet the eligible criteria under the Ontario Immigrant Nominee Program;

  3. Are Protected Persons under the Immigration and Refugee Protection Act (Canada);

  4. Have a spouse who is a Canadian Citizen or Permanent Resident (PR) or a nominee or a protected person and if they will occupy the property as their primary residence.

If the above criteria do not apply to a foreign national, there are ways to qualify for a rebate as well. Rebates can be granted on an application basis if a person meets the following criteria:

  1. The purchaser becomes a Permanent Resident of Canada within four (4) years of purchase of the property; and

  2. They hold the property as sole owner, or with their spouse only; and

  3. They occupy the property as their principal residence, or as a matrimonial home if they have a spouse.

Only one of the spouses needs to be a PR to apply for a rebate. The application for the rebate must be done within 90 days of becoming a PR. It is important to apply within the period of your status being changed to PR, and not waiting for the Immigration, Refugees and Citizenship Canada (IRCC) to issue you a PR card.

The NRST was put in place to curb foreign investment in driving up costs and is supposed to help residents of Ontario and Canada be part of an affordable housing market. If you are a foreign investor or in Canada on a work permit, it is imperative that you consider the implications of the NRST when deciding to purchase residential real estate in Ontario.