Foreign Buyer Tax in Canada

WOWA Simply Know Your Options

Best 5-Year Fixed Mortgage Rates in Canada

Select Mortgage Term:

1-Yr

2-Yr

3-Yr

4-Yr

5-Yr

Fixed

Variable

See More Rates

Foreign investment is generally excellent for the economy; however, in some cases, it can cause a boom, such as in the case of some Canadian housing markets. Speculative buying by foreign buyers has aided the increase of home prices in some cities, making it unaffordable for locals to buy a house. Currently, the foreign buyer tax is levied in Ontario and parts of British Columbia. Meanwhile, the province of Nova Scotia levies a Non-Resident Deed Transfer Tax on buyers who do not reside in Nova Scotia, which applies to both Canadian and foreign buyers. Continue reading to learn more about this tax, if it applies to you, and how to get a rebate.

Foreign buyer's tax is a type of non-resident tax that certain foreign purchasers must pay at closing when buying a house in Ontario, certain regions of B.C. or Nova Scotia. In Ontario, the foreign buyer tax is known as NRST (Non-Resident Speculation Tax) and is 25% of the value of consideration. In B.C., the additional property transfer tax is 20% of the property's fair market value. In Nova Scotia, foreign buyers must pay an additional 5% of the purchase price or the assessed value (whichever is greater) as the Non-resident Deed Transfer Tax.

The tax affects individuals who are not Canadian citizens or permanent residents of Canada. However, the tax will also apply to transactions where any purchaser on the title is foreign, even if there are other Canadian residents on the title.

The tax also applies to foreign corporations incorporated outside of Canada. Likewise, Canadian corporations controlled by foreign nationals still need to pay the tax.

In Ontario, the Non-Resident Speculation Tax (NRST) is a 25% tax on residential property purchased anywhere in the province. The tax applies to non-citizens and non-permanent residents of Canada who are buying a house in Ontario. Previously, this tax was 15% and only applied to residential property located in the Greater Golden Horseshoe Region (GGH). Effective March 30, 2022, the NRST was increased to 20% and is now effective province-wide. Effective October 25, 2022, the NRST was increased further to 25%.

Although the tax applies to foreign individuals who are not permanent residents of Canada, there are also exemptions in the following situations:

• Nominee: Foreign nationals who are nominated under the Ontario Immigrant Nominee Program. They must also certify that they will apply to become a Canadian permanent resident.
• Protected person: Foreign nationals with refugee protection.
• Spouse: A spouse of a Canadian citizen, permanent resident, nominee or protected person.

If a foreign national meets any of the above criteria, they are exempt from paying the NSRT. However, they must occupy the property as their primary residence within 60 days after the date of conveyance is registered to qualify for an exemption.

Meanwhile, the exemption will not apply if any of the parties involved in the purchase does not meet the exemption criteria. For example, suppose three people acquire a property as follows:

• A Canadian citizen,
• Their foreign spouse, and
• A third party that does not meet any exemption criteria.

Although the foreign spouse meets the exemption criteria, the third party does not. As a result, the NSRT must be paid on the total property purchase price.

Foreign nationals who don't qualify for an exemption may be eligible for an NRST rebate under certain situations. Foreign nationals who have paid the NRST and qualify under one of the following criteria can receive a rebate or return of tax.

• A foreign national who becomes a permanent resident of Canada: Within four years of purchase, a foreign national becomes a permanent resident of Canada.
• International student: A foreign national enrolled in an “approved Canadian institution” for at least two years following the date of purchase. This rebate does not apply to transfers that occur after March 29, 2022.
• Foreign national working in Ontario: A foreign national who legally works full-time in Ontario for a continuous period of one year following the date of purchase. This rebate does not apply to transfers that occur after March 29, 2022.

To qualify, the property must be occupied as the principal residence within 60 days after the date of conveyance is registered. Additionally, it must be held by the qualifying foreign national alone or with their spouse.

Application Time Limit: Foreign nationals who become residents of Canada must apply within 180 days of becoming residents to receive the NRST rebate. Eligible international students and foreign workers must apply within four years of paying the rebate or by March 31, 2025, whichever is earlier.

Registering for a Rebate: If you qualify for a rebate and have supporting documentation, you can apply using the Ontario Land Transfer Tax Refund/Rebate affidavit.

NRST applies to the transfer of “designated land” with one to six residential units. Multi-residential buildings with more than six units and specific types of land do not qualify for NRST.

If purchasing a residential plus commercial property, the NRST is applied only to the residential portion of the property.

Ontario’s Non-Resident Speculation Tax applies province-wide. Prior to March 30, 2022, the NRST in Ontario was only effective in the Greater Golden Horseshoe Region (GGH).

British Columbia requires foreign entities and taxable trustees to pay an additional property transfer tax of 20% of the property’s fair market value (FMV) when purchasing a property in some specific regions. The tax's proceeds are invested in affordable housing initiatives within the province.

The tax applies only to the residential portion of a property. Meanwhile, the tax is only applicable to the proportionate share of the foreign entity. For example, if a foreign entity acquires 30% interest in a residential property, the tax will apply only to that 30% of the property’s fair market value.

You can be exempted from the additional tax if:

• You are exempted from paying property transfer tax.
• You are a B.C. Provincial Nominee.
• You are acquiring the property on behalf of a Canadian-controlled limited partnership.

If you have paid the foreign buyer tax, you may be able to get a refund of the same under the following conditions:

• You become a Canadian citizen or permanent resident within one year of the property transfer being registered with the Land Title’s Office. To qualify, you must also move into the home within 92 days of the property transfer registration and use the home as your primary residence for at least one year.
• The tax was paid in error, for example, you qualified for an exemption but did not claim it.

You can apply for a refund using the additional property transfer tax refund application form.

Taxable regions for the foreign buyer tax in BC are:

• Capital Regional District
• Fraser Valley Regional District
• Metro Vancouver Regional District
• Regional District of Central Okanagan
• Regional District of Nanaimo

Nova Scotia's Minister of Finance implemented the Provincial Deed Transfer Tax (PDTT) on April 1, 2022. The tax applies to all non-residents of Nova Scotia, implying that Canadian buyers buying a home in Nova Scotia will also need to pay it if they reside in another province.

Non-residents are required to pay an increased land transfer tax in Nova Scotia. The tax is charged at 5% of the purchase price or the assessed value of the property, whichever is greater. Listed below are some key facts about the tax:

• The PDTT applies only to residential properties with three dwellings or fewer, including vacant land.
• The PDTT only applies to the portion of ownership interest being transferred to a non-resident.
• The tax will be exempted if the purchaser becomes a resident of Nova Scotia within six months of the transaction closing date.

Overall, the foreign buyer taxes are designed to keep housing affordable for Canadian residents. By decreasing foreign investor demand in certain hotspots, provinces and cities can prevent the cost of real estate from skyrocketing. However, each province has different exemptions and rebates/credits available to offset the tax.

Yes, you will still need to pay the land transfer tax. The land transfer applies to the original purchase price before adding the NRST.

Ontario’s NRST is effective province-wide. Prior to March 30, 2022, only these areas were subject to Ontario’s Non-Resident Speculation Tax:

• 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.

The term ‘satellite family’ usually refers to untaxed worldwide earners whose household income not taxed in Canada is more than that taxed in Canada. This is usually the case where one of the spouses is living in Canada and has a lesser income than the spouse living outside Canada.