Speculation tax for foriegn home buyers

What is the Non-Resident Speculation Tax

The rising price of homes in Ontario has only become more astonishing since the start of the pandemic. As Toronto has become almost entirely unaffordable for most first-time home buyers, and more and more companies are transitioning to permanently remote work, Ontarians are looking to move their families to smaller towns and communities where real estate may be more affordable outside of the GTA.

The trouble is that as families move outside the Toronto core, prices in the suburbs are driven up as well. The average home price in Cambridge is up roughly 40% from this time last year, with prospective buyers struggling to afford their own space. While there are various factors that have driven prices so high, a good deal of blame is placed on the influence of foreign buyers. 

Canadian real estate is desirable to foreign buyers looking to make an investment in North America. Given the extreme wealth in some overseas populations, the high price tags of homes here are no obstacle for foreign buyers, and that interest only drives prices higher for Canadian residents. While it may seem like the ‘Wild West’ at times, the government has been working to regulate this issue for the past five years with the non-resident speculation tax.

What is the non-resident speculation tax?

The non-resident speculation tax (“NRST”) is a 15% tax that Ontario has imposed on all non-resident real estate buyers after April 21, 2017. This tax can be steep – roughly $150,000 or more for a single-family home, and often significantly higher given the sale price.

The NRST does not replace provincial or municipal land transfer tax – both are still applicable. It is simply a measure to dissuade, or at least regulate, the non-resident foreign investment that drives up prices similar to what is in place in British Columbia. 

Foreign entities or corporations are subject to the NRST, including foreign nationals (people who are not Canadian citizens or permanent residents of Canada), and taxable trustees (trusts that have a foreign entity trustee or benefit a foreign entity). 

Where does the non-resident speculation tax apply?

The non-resident speculation tax applies to purchases in the Greater Golden Horseshoe Area, which stretches as far East as Peterborough and Northumberland, and as far south as Niagara and Haldimand. The list of applicable regions includes:

  • 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.

Who is exempt from the non-resident speculation tax?

There are several categories of individuals who are or may be exempted from the NRST. Nominees under an immigration nominee program at the time that they buy their property may be eligible for an exemption. Similarly, if you are officially protected under a refugee program then you may not be required to pay the tax. Lastly, the spouse of a Canadian citizen, resident, or nominee who buys property may also be exempt but are not exempt if they have bought the property along with another foreign national.

The exemption only applies if you plan on living in the property as your principal residence and can certify that you will do so. 

How can I obtain a tax rebate?

There are several ways to obtain a rebate from the NRST. For example, if you become a permanent resident of Canada within 4 years of making your purchase, you may be eligible for a rebate. Alternatively, if you are enrolled in school (at a pre-approved institution) as a full-time student for 2 continuous years from the date of your purchase, you may be eligible for a refund. 

Lastly, a foreign national working full-time in Ontario for at least a year since their purchase may be eligible, however, there are certain requirements that the owner must meet to hold and live in the property for a period of time in order to meet the criteria. 

Final thoughts

The NRST can become incredibly complex but nevertheless needs to be taken seriously. There are anti-avoidance rules in place to ensure that those subject to the tax do not escape it, and anyone caught not paying the tax may be subject to fines or even prison. 
This is only a simple overview, but anyone who may be eligible for an exemption or rebate on the NRST should contact a real estate lawyer to assess the specifics of their case. Our real estate lawyers deal with all matters of real estate law and would be happy to help assess the particulars of your case. Contact us today to set up a consultation.