Canadian Tax and Estate Planning

Ontario’s Non-Resident Speculation Tax (NRST) is commonly referred to as the foreign home buyers tax.

What is the NRST?

This tax is over and above the Ontario land transfer tax paid on the purchase of a residential property and applies to home purchases made by certain foreigners. When introduced in 2017, it impacted properties in the Greater Golden Horseshoe region of Ontario and the NRST rate was 15 per cent of the home’s purchase price. Since then, there has been a number of changes:

• For homes bought on or after March 30, 2022:
  • the tax rate increased from 15 per cent to 20 per cent.
  • the application of the tax was expanded to all homes in Ontario.
• Last fall, the tax rate increased from 20 per cent to 25 per cent, effective for home purchases made on or after October 25, 2022.

Who must pay the NRST?

The NRST is paid on homes bought by foreigners who are not permanent residents of Canada or Canadian citizens. Homes purchased by foreign corporations and taxable trustees (trustees of a trust with at least one foreign trustee or foreign beneficiary) are also taxable. Excluded are homes purchased by trustees of mutual fund trusts, real estate investment trusts, and specified investment flow-through trusts.

The NRST applies to structures that can accommodate one to six single family residences. The tax can also apply to seasonal properties, such as cottages. Excluded are multi-residential units (more than six units), commercial and industrial land, and homes on qualifying farms.

In most cases, when a foreigner buys a home jointly with another party, the NRST applies to the whole purchase price, and not just the foreigner’s interest in the property. Since the NRST is a joint liability, if a Canadian buys a home with a foreigner who does not qualify for an NRST exemption, the Canadian will be solely responsible for the NRST if the foreigner does not pay their portion of the tax.

While an NRST exemption can apply based on the type of property purchased, exemptions from the NRST can also be granted based on the status of the foreign individual, when certain conditions are met.

A foreigner may be eligible for an NRST exemption if at the time of home purchase, the individual is:

1. A nominee under the Ontario Immigrant Nominee Program. They must apply or certify to become a permanent resident of Canada before the expiry date of their nominee certificate; or
2. A protected person (refugee) under the Immigration and Refugee Protection Act (Canada); or
3. The spouse of a Canadian citizen, a permanent resident of Canada, a nominee, or a protected person and both spouses are making the purchase jointly.

In all three cases above, if there are additional joint purchasers, every joint purchaser must be a Canadian citizen, a permanent resident of Canada, a nominee, or a protected person. Similarly, every joint buyer must certify that the home will be occupied as their principal residence.

The NRST is payable when the property is registered electronically through Ontario’s property registration system (Teraview). As such, a foreign purchaser should inform their real estate lawyer if they are eligible for an NRST exemption. Appropriate forms must be completed, and the exemption is claimed at the time of property registration.

An unregistered property transfer, such as the acquisition of a beneficial interest in the property, is not eligible for an NRST exemption. These transactions are more complex and should be undertaken only with the assistance of a professional.

NRST rebates

In addition to NRST exemptions, a rebate of previously paid NRST may be available if certain conditions are met. For home purchases made on or after March 29, 2022, the only rebate available is the Permanent Resident NRST Rebate.

To be eligible for this rebate, the foreign purchaser must:

1. Have become a permanent resident within four years of the home’s purchase date;
2. Own the property as a sole owner or hold the property jointly with only their spouse; and
3. Have lived in the home, with their spouse, if applicable, as their principal residence throughout the period starting within 60 days of the home purchase date, ending on the rebate application date or date that rebate conditions are met, whichever is later.

Where the spouses jointly own property, assuming all other applicable conditions are met, they are eligible for the rebate once one spouse becomes a permanent resident of Canada.

The Ontario Land Transfer Tax Refund/Rebate Affidavit form is used to claim the rebate. This form and supporting documents must be received by the Ontario Ministry of Finance within 90 days of the foreigner becoming a permanent resident of Canada. Since a person can receive their Permanent Resident Card after the 90 day deadline, other items can be used to prove residency status. For example, a “Confirmation of Permanent Residence” document that is dated and certified with an immigration officer’s signature can confirm residency status.

Note that a home purchased before March 29, 2022, may be eligible for a rebate of NRST under:

1. The previous NRST Rebate, for a property purchased in the Greater Golden Horseshoe area;
2. The former International Student NRST Rebate; or
3. The former Foreign National Working in Ontario NRST Rebate.

The deadline to apply for these former rebates is the earlier of March 31, 2025, or the date that is four years from the date on which the NRST became payable.

These former rebates can also be claimed by submitting the Ontario Land Transfer Tax Refund/Rebate Affidavit form and supporting documents to the Ontario Ministry of Finance.

If you have any questions regarding NRST or need further information, please reach out to our Canadian Tax group.