Understanding Ontario's Non-Resident Speculation Tax (NRST) for Foreign Buyers
Wednesday Apr 05th, 2023
Unpacking Ontario's Non-Resident Speculation Tax (NRST)
A Brief History of the NRST
Ontario first implemented the NRST in April 2017 to curb international investors from purchasing residential properties in the province, making homeownership more accessible for local residents. Initially, the 15% tax only applied to the Greater Golden Horseshoe Region (GGH) in Southern Ontario. However, it later expanded province-wide. On March 30, 2022, the NRST increased to 20%; on October 25, 2022, it rose to 25%. CBC News reported that this tax rate is the highest in Canada, aiming to discourage foreign speculation. The NRST, along with Toronto's Vacant Home Tax and the federal government's 2-year ban on foreign buyers, collectively strive to make housing more affordable for Canadians.
Who is Subject to the NRST?
The NRST targets individuals who are not Canadian citizens or permanent residents, such as:
Foreign nationals
Transactions involving both foreign nationals and Canadian buyers.
Foreign companies incorporated outside of Canada.
Canadian companies are controlled by a foreign national.
Taxable trustees purchasing residential property in Ontario.
Properties Covered by the NRST
The NRST applies to "designated land," which includes land containing one to six single-family residences, such as:
Detached houses.
Semi-detached houses
Townhouses
Condominium units
Cottages and cabins
Select time-share properties.
Vacation homes
Calculating the NRST
The NRST calculation depends on the property type and ownership structure. For example, a foreign national purchasing a $1,000,000 home in Ontario would pay a 25% NRST, totaling $1,250,000. In more complex scenarios involving residential and commercial property or tenants-in-common, the NRST calculation varies.
NRST Payment and Submission
The NRST must be paid upon closing and submitted to the Ministry of Finance at least 15 days before the date of conveyance, typically through the buyer's real estate lawyer.
Exemptions to the NRST
Some exemptions to the NRST include:
Foreign nationals buying property with a Canadian spouse.
Protected persons with refugee status.
Foreign nationals nominated under the Ontario Immigrant Nominee Program (OINP)
To qualify for these exemptions, the property must be designated as the buyer's primary residence.
NRST Rebate Qualifications
Foreign nationals can qualify for an NRST rebate if they:
Pay the NRST
Become permanent residents within four years of buying the property.
Hold the property alone or with their spouse.
Make the property their principal residence within 60 days of purchase.
Rebates are no longer available for international students and foreign workers as of March 30, 2022, except under certain conditions.
Applying for an NRST Rebate
Rebate applications require specific documentation and must be submitted to the Ministry of Finance within 90 days of becoming a permanent resident.
NRST Impact on the Real Estate Market
The Vacant Home Tax, Foreign Buyer Ban, and NRST all aim to make housing more accessible for Canadians. While the federal government's ban on foreign home purchases is set to expire on December 31, 2024, the NRST will remain in place, potentially with even higher rates. However, exemptions and rebates can provide some relief for qualifying individuals.
Navigating the NRST Landscape
Understanding and navigating the NRST landscape can be complex, especially for foreign buyers. If you have questions or need assistance with the NRST , don't hesitate to reach out to a knowledgeable real estate professional for guidance and support.
Do you have questions about the NRST ? Contact us for expert advice and assistance.
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Sami Chowdhury
Broker
RE/MAX Realtron Realty Inc., Brokerage
885 Progress Avenue, Suite 209, Toronto, Ontario, M1H 3G3
Direct: (647) 725-0606
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