Canada: Ontario Imposes 15% Non-Resident Speculation Tax

Last Updated: April 24 2017
Article by Brittany Finn

As one of 16 measures introduced under "Ontario's Fair Housing Plan", the Ontario government has announced the introduction of a non–resident speculation tax (NRST) effective April 21, 2017. Binding agreements of purchase and sale signed on or before April 20, 2017 are not subject to the NRST. The proposed NRST is a 15% tax that will apply to the purchase or acquisition of an interest in residential property located in the Greater Golden Horseshoe (GGH) by individuals who are not citizens or permanent residents of Canada and by foreign corporations and taxable trustees. The GGH includes the geographic areas of Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington and York.

The NRST applies in addition to the general land transfer tax in Ontario and the municipal land transfer tax in Toronto. This means that for residential transactions in the City of Toronto in excess of $2 million, non–resident purchasers may be liable for combined NRST and land transfer taxes of up to 20%.

Entities Subject to the NRST

The NRST applies to foreign entities or taxable trustees who purchase or acquire residential property in the GGH. A foreign entity is either a foreign national or foreign corporation. A foreign national is an individual who is not a Canadian citizen or permanent resident of Canada. A foreign corporation is a corporation:

  • that is not incorporated in Canada;
  • that is incorporated in Canada but is controlled in whole or in part by a foreign entity, unless the shares are listed on a Canadian stock exchange; or
  • that is "controlled directly or indirectly" by a foreign entity within the meaning of the Income Tax Act (Canada).

For the purposes of the NRST, a taxable trustee includes:

  • a foreign entity holding title in trust for beneficiaries; and
  • a Canadian citizen, permanent resident of Canada, or a corporation holding title in trust for foreign entity beneficiaries.

General Application

The NRST applies to the transfer of land which contains at least one and not more than six single family residences, including unregistered dispositions of a beneficial interest in residential property. It does not apply to transfers of other types of land such as multi-residential rental apartment buildings with more than six units, or agricultural, commercial or industrial land.

The 15% NRST applies to the value of the consideration for the property if any one of the transferees is a foreign entity or taxable trustee. The NRST applies to 100% of the value of consideration for the transfer, even if the foreign entity transferee is acquiring less than 100% of the interest in the residential property.

Each transferee is jointly and severally liable for any NRST payable. If the non-resident transferee does not pay the NRST, the other transferees will be required to pay the tax, even if the other transferees are Canadian citizens or permanent residents of Canada.

Exemptions

The NRST does not apply where the purchaser is a mutual fund trust, real estate investment trust (REIT) or specified investment flow-through trust or in certain other limited circumstances. In addition, rebates of the tax will be available in limited cases.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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