Introduction – Ontario Non-Resident Speculation Tax
Ontario's non-resident speculation tax applies when real property located in the greater golden horseshoe region in Ontario is purchased by a foreign entity or taxable trustee. The greater golden horseshoe region refers to a particular list of cities, counties, and regional municipalities located in southern Ontario. Notably this list includes: Toronto, Hamilton, Guelph, and Barrie.
For the purposes of the non-resident speculation tax the term "foreign entity" means either a foreign national or a foreign corporation. A foreign national is an individual who is neither a citizen of Canada nor a permanent resident of Canada. A foreign corporation is a corporation not incorporated in Canada or any corporation controlled by one or more:
- foreign national,
- corporation incorporated outside of Canada, or
- corporation that would, if each share of the corporation's capital stock that is owned by a foreign national or by a corporation not incorporated in Canada were owned by a specific hypothetical person, that person would control the corporation.
"Taxable trustee" is defined as the trustee of a trust with at least one foreign entity as a trustee. A trust with no foreign entity trustees is a "taxable trustee" if immediately after real property is purchased by the trustee, a beneficiary of the trust who is a foreign entity holds a beneficial interest in the real estate. Mutual funds, real estate investment trusts, and SIFT trusts are specifically excluded from being taxable trustees.
The non-resident speculation tax is charged when the conveyance effecting the transfer to a foreign entity or taxable trustee is tendered for registration. Each person receiving an interest in the property in the conveyance is jointly and severally liable for the non-resident speculation tax. The amount of the tax is 15% of the value of the consideration provided in exchange for the property.
The amount of tax owing is not proportional to the size of the interest acquired in the real estate by the foreign entity or taxable trustee. A transaction where a foreign national acquires 1% of a property and a Canadian citizen acquires the remaining 99% results in the same amount of non-resident speculation tax as if the foreign national had acquired 100% of the property. There are however several exemptions and rebates that can provide relief to taxpayers who would otherwise need to pay Ontario non-resident speculation tax. The rebate available to foreign nationals who will be working full time in Ontario will be explored in this article.
Foreign National Worker's Rebate – Ontario Non-Resident Speculation Tax
There is a full rebate available to some individuals who were foreign nationals at the time they purchased a property but who will be working in Ontario full time and who occupies the property shortly after the purchase.
To be eligible for this rebate, the foreign national applicant must have been employed full-time in Ontario under a valid work permit for at least a continuous period of one year after the day the purchase transaction for the property closes. In addition, the applicant must occupy the property as his or her principal residence within sixty days of the purchase transaction closing.
For the purposes of the rebate, "full-time" employment requires
- no fewer than 30 hours of paid work per week over a 12 month period; and
- no fewer than a total of 1,560 hours of paid work over that period.
The Land Transfer Tax Act or its regulations do not specify how vacation time is to be treated for the above mentioned definition of "full-time" employment.
The foreign national worker's rebate is also only available if the purchase transaction is structured in one of two ways. The first way is if the individual applying for the rebate is the only person receiving an interest in the property when the purchase transaction closes. The second way is if the only persons receiving interests in the property when the purchase transaction closes are the individual applying for the rebate and that individual's spouse.
Rebate Application Process – Ontario Non-Resident Speculation Tax
To apply for an foreign national worker's rebate, you must submit a written application for the rebate to the Ontario Ministry of Finance which sets out the information required for the Ministry of Finance to determine whether you are eligible for the rebate. The rebate application must be made within four years after the day on which the non-resident speculation tax became payable.
Individuals intending to apply for the rebate must still pay the non-resident speculation tax at the time they purchase property. If a rebate application succeeds, the individual will receive a full refund of the tax paid plus interest at a rate specified by the Land Transfer Tax Act if the refund is not issued within 40 days of the rebate application being submitted.
Disputing Rebate Decisions – Ontario Non-Resident Speculation Tax
If the Ontario Ministry of Finance rejects your application for foreign national worker's rebate it will issue a statement of disallowance. If you decide to dispute the Ministry of Finance's decision, you can do so by filing a notice of objection with the Ministry of Finance within one hundred and eighty days of the mailing or personal service date of the statement of disallowance.
If the Ontario Ministry of Finance rejects your objection to its foreign national worker's rebate decision, you can appeal that decision to the Ontario Superior Court of Justice. To appeal, you are required to file a notice of appeal with the Superior Court of Justice within ninety days of the mailing date of the Ministry of Finance's written notice to you of its decision regarding your objection.
Tax Tips – Foreign National Worker's Rebate for Ontario Non-Resident Speculation Tax
If you are a foreign national considering purchasing real estate in Ontario and relying on the foreign national worker's rebate, you should consult a top Toronto tax lawyer before making the purchase. The conditions for the rebate to be available are complex and can have counter intuitive results. For example, the rebate is not available if a property is purchased jointly by a foreign national working in Ontario who would otherwise be eligible for the rebate and a Canadian citizen who is not the spouse of the foreign national. This is true notwithstanding the fact that if either purchaser had purchased the property by themselves they would either have the rebate available or would not be subject to the tax at all. In addition, the process for applying for and disputing rebates is intricate. Seeking a rebate without the assistance of an experienced Toronto tax lawyer could result in irreversible errors.
If you are considering purchasing a property in Ontario and relying on this rebate then it is important to be sure that you are going to have stable employment for a long period of time. The rebate requires a "continuous" one year period of employment so interludes between working at different jobs may effect eligibility for the rebate.