Non-Resident Speculation Tax in Canada

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Foreign investment is excellent for the economy; however, in some cases, it's causing a boom in specific Canadian housing markets that makes it unaffordable to buy a house. Ontario and BC introduced a foreign buyers tax in specific regions to keep housing affordable for Canadian residents. To learn more about this tax, if it applies to you, and how to get a rebate, continue reading.

The Non-Resident Speculation Tax (also referred to as the Foreign Buyer's Tax) is a tax that certain foreign purchasers must pay at closing when buying a house anywhere in the province of Ontario or in certain B.C. regions. The NRST is 25% in Ontario and 20% in B.C.

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

Non-resident speculation tax extends to foreign corporations that are incorporated outside of Canada. Likewise, Canadian corporations controlled by a foreign national still need to pay the tax when purchasing a property in Ontario or BC.

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%.

Source: Ontario Ministry of Finance

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: Foreign nationals purchasing property with a Canadian spouse.

If a foreign national meets any of the prior criteria, they are exempt from paying NSRT. However, the foreign national must designate the property as their primary residence for an exemption to qualify.

As stated previously, the exemption will collectively not apply if any party involved in the purchase does not meet the exemption criteria. For example, suppose three people acquire a property as follows:

• A Canadian citizen with a foreign spouse
• 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 total NSRT must be paid on the property purchase.

Foreign nationals who don't qualify for an exemption may be eligible for a rebate under certain situations. A rebate is a payment that the foreign national receives after qualifying. Although they receive the NRST fee back, they will have to pay the tax when buying the property.

A rebate may be received if the applicant meets the following scenarios:

• 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.
• 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.

As with the exemption, to qualify, the property must be designated as the principal residence within 60 days of purchasing. Additionally, the property must exclusively be held by the qualifying foreign national or with their spouse.

There is a time limit foreign nationals must apply by in order to receive the rebate. Foreign nationals who become a resident in Canada must apply within 90 days of becoming a resident to receive the NRST rebate. International students and foreign nationals must apply within four years of paying the rebate.

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 form for NRST.

NRST only applies when purchasing buildings with one to six units. Multi-residential buildings with more than six units and specific types of land do not apply to NRST.

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

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). For a complete list of applicable regions, please check the FAQ below.

The British Columbia Non-Resident Speculation Tax (NRST) forces foreign homebuyers to pay a 20% tax on purchases in specific regions. Proceeds from the tax are invested into affordable housing initiatives within the province.

Source: CTV News Vancouver

In general, British Columbian homeowners are exempted from the tax if their property is their primary residence. However, a popular exemption for owners of non-principal residences is to rent them out.

The home must be rented for at least six months each year to avoid paying the speculation and vacancy taxes. Short-term rentals of less than one month's duration do not contribute towards the six-month total.

Individual and commercial exemptions are available for situations such as extensive house renovations and life events like divorce, hospitalization, or extended absence. For a complete list of NRST exemptions, visit the BC government's page on Exemptions for individuals for the speculation and vacancy tax.

Foreign residents who aren't eligible for exemptions may be eligible for a tax credit to reduce the amount they need to pay. Unlike the Ontario rebate, a tax credit is generally not directly deposited into your bank account. Instead, the credit is deducted from the taxes you owe. For BC foreign residents, there are two tax credits available for the NRST.

• BC residents: This category can enjoy a tax credit of up to $2000 each year. To qualify, applicants must be tax residents of BC, Canadian residents, and not members of a satellite family.
• Other owners: This category can receive a variable NRST tax credit based on their BC income reported. Those qualified for this credit include; foreign owners, members of a satellite family, non-tax residents of BC, and specific corporate structures.

Taxable regions for the speculation and vacancy tax in BC can be found in the FAQ below.

Nova Scotia's Minister of Finance introduced the new budget on March 29, 2022. Within the budget, a new NRST program was introduced for non-local buyers. Interestingly, the tax applies to non-residents of Nova Scotia, implying that Canadian buyers will need to pay the tax if they reside in another province. This new tax will affect non-residents who wish to purchase real estate in Nova Scotia:

Starting April 1, 2022, non-residents will need to pay an increased land transfer tax in Nova Scotia. The tax is charged at 5% of the purchase price valuation and is due at the end of the tax year. This is a steep increase from 1% to 1.5% purchasers would previously pay when buying a home in Nova Scotia. However, the tax will be exempted if the purchaser becomes a resident of Nova Scotia within six months of the transaction closing date.

Nova Scotia's proposed non-resident property tax was scrapped on May 5, 2022, and will no longer apply. It was proposed that in the 2022-23 tax year, non-residents would need to pay an increased annual property tax in Nova Scotia. The proposed tax is an additional 2% on the assessed value for non-residents. It is similar to the vacancy tax seen in BC. However, the tax will not apply to residential properties that exceed three units or are leased to Nova Scotia residents for at least 12 months.

Overall, the non-resident speculation tax (NRST) is designed to keep housing affordable for Canadian residents. By decreasing foreign investor demand in certain hotspots, BC and Ontario can prevent the cost of real estate from skyrocketing. Foreign purchasers must pay a 25% tax in Ontario and a 20% tax in BC. 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. However, the land transfer tax only includes the original purchase price before NRST. You will not need to pay land transfer tax on the total purchase price that includes 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.

• Capital Regional District (CRD)
• Metro Vancouver Regional District
• City of Abbotsford
• District of Mission
• City of Chilliwack
• City of Kelowna
• City of West Kelowna
• City of Nanaimo
• District of Lantzville

An untaxed worldwide earner, also known as a member of a satellite family, is someone whose unreported Canadian income exceeds their reported Canadian total income.