Ontario to Implement and Increase the Non-Resident Speculation Tax

Ontario is increasing it’s non-resident speculation tax this morning to 20% (from 15%) and expanded its eligibility from just the Golden Horse Shoe region to the entirety of Ontario. This new change is enacted as of today, March 30th, 2022. 

So what is the NRST? 

The non-resident speculation tax is a tax on investment homebuyers from outside of the country - this includes foreign nationals (anyone who is not a citizen or permanent resident of Canada) as well as foreign corporations or taxable trustees. 

Essentially, this tax was created to discourage out-of-country buyers from buying property in Ontario to be used as an investment property, with the hopes that costs would remain lower for Ontario residents looking to purchase their first homes. 

The tax began in the Golden Horseshoe Region, but is now being expanded to the entire province of Ontario. 

Golden Horseshoe Region in Southern Ontario

Let’s define who is subject to NRST: 

• Foreign Entities: Foreign Nationals or Foreign Corporations

• Foreign Nationals: An individual who is NOT a Canadian Citizen or Permanent Resident

• Foreign Corporation: Not incorporated in Canada, not listed on a stock exchange in Canada, or is controlled by a foreign national or a corporation not incorporated in Canada.

• Taxable Trustees: A trust with at least one foreign trustee or a trust whose beneficiary is a foreign entity. 

What properties are subject to the NRST?

The NRST applies to the transfer of “designated land” which is any land that contains at least one and not more than six single-family residences. This includes detached, semi-detached, townhouses, and condos. It includes duplexes, triplexes, fourplexes, fiveplexes, and sixplexes. 

The NRST does not apply to land that contains multiple residential rental apartment buildings with more than six units, industrial land, or commercial land. 

The NRST also only applies to sections of land that are used for residential purposes. If you, as a foreign national, purchased a plot of land that has both a house and a commercial building, you would only pay the NRST on the residential section of your land. 

Are there any exemptions?

You may be exempt from paying the NRST if you are a nominee, a protected person or have a Canadian spouse, or you are a permanent resident.

In other words, you must be nominated to become a citizen, be protected as a refugee, or you are buying the property to live there with your Canadian spouse. 

Why are they changing the tax? 

As you may know, Ontario, and Canada on a wider scale, is experiencing a ‘housing crisis.’ This means that there are not enough houses for buyers in our province and country. Prices are rising quickly, and owning a home is becoming more and more unaffordable year over year. In order to address this, Ontario has a ‘housing supply action plan’ in order to build more houses, and make more housing available to Ontario residents. 

What about people looking to move to Canada? 

This tax is not relevant to anyone looking to become a Canadian citizen. Canada still has a welcoming policy for all immigrants. If you are buying a home in Canada but are not yet a Canadian citizen, if you become one within four years of purchasing your home, you are eligible for a rebate on this tax. 

However, this is a change from foreign nationals who work in Ontario and international students. They used to be eligible for a rebate, but will no longer be eligible unless they intend to become citizens within the next 4 years. 

How is this relevant to the Ottawa housing market? 

Ottawa is not part of the Golden Horseshoe, meaning before this, there was no tax on foreign nationals and companies purchasing property in the area. Ottawa residents have seen the quick rise in housing prices in our neighbourhoods, as well as the lack of availability (also known as Ottawa being in a ‘seller’s market’). 

It will now be much harder and more expensive for non-Canadian residents (those not intending to become one) and foreign companies to purchase real estate in Ottawa. 

For more information on the NRST and all the details, visit the government’s web page: HERE