Non-Resident Speculation Tax

The Non‑Resident Speculation Tax (NRST) is a 15 per cent tax on the purchase or acquisition of an interest in residential property located in the Greater Golden Horseshoe Region (GGH) by individuals who are not citizens or permanent residents of Canada or by foreign corporations (foreign entities) and taxable trustees.

The NRST applies in addition to the general Land Transfer Tax (LTT) in Ontario.

The GGH includes the following geographic areas:

• 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 NRST took effect April 21, 2017.

Binding agreements of purchase and sale signed on or before April 20, 2017, and not assigned to another person after April 20, 2017, are not 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 corporation or a foreign national.

A foreign corporation is a corporation that is one of the following:

1. A corporation that is not incorporated in Canada.
2. A corporation, the shares of which are not listed on a stock exchange in Canada, that is incorporated in Canada and is controlled, directly or indirectly in any manner whatever, within the meaning of section 256 of the Income Tax Act (Canada), by one or more of the following:

• a foreign national
• a corporation that is not incorporated in Canada
• a corporation that would, if each share of the corporation’s capital stock that is owned by a foreign national or by a corporation described in paragraph 1 were owned by a particular person, be controlled, directly or indirectly in any manner whatsoever, within the meaning of section 256 of the Income Tax Act (Canada), by the particular person.

A foreign national, as defined in the Immigration and Refugee Protection Act (Canada), is an individual who is not a Canadian citizen or permanent resident of Canada.

A permanent resident means a person who has acquired permanent resident status and has not subsequently lost that status under section 46 of the Immigration and Refugee Protection Act (Canada).

A taxable trustee means a trustee of:

• a trust with at least one trustee that is a foreign entity, or
• a trust with no foreign entity trustees if a beneficiary of the trust is a foreign entity.

Taxable trustee does not include a trustee acting for the following types of trusts:

1. A mutual fund trust within the meaning of subsection 132 (6) of the Income Tax Act (Canada).
2. A real estate investment trust as defined in subsection 122.1 (1) of the Income Tax Act (Canada).
3. A SIFT trust as defined in subsection 122.1 (1) of the Income Tax Act (Canada).

Types of property subject to the NRST
The NRST applies to the transfer of land which contains at least one and not more than six single family residences. Examples of land containing one single family residence include land containing a detached house, a semi‑detached house, a townhouse or a condominium unit. In a situation involving the purchase of multiple condominium units, each unit would be considered land containing one single family residence. Examples of land containing more than one single family residence that are subject to the tax include land containing duplexes, triplexes, fourplexes, fiveplexes and sixplexes.

The NRST does not apply to other types of land such as land containing multi‑residential rental apartment buildings with more than six units, agricultural land, commercial land or industrial land.

The NRST applies on the value of the consideration for the residential property. If the land transferred includes both residential property and another type of property, the NRST applies on the portion of the value of the consideration attributable to the residential property. For example, if the purchase price of the transaction is $1,000,000 and contains one single family residence with a value of the consideration of $400,000, and commercial land with a value of the consideration of $600,000, the 15 per cent NRST would apply to only the $400,000 portion.

Exemptions
An exemption from the NRST may be available in the following situations:

• Nominee – A foreign national who is nominated under the Ontario Immigrant Nominee Program (nominee) at the time of the purchase or acquisition, and the foreign national has applied or certifies that they will apply to become a permanent resident of Canada
• Protected person – A foreign national on whom refugee protection is conferred (protected person) under section 95 of the Immigration and Refugee Protection Act (Canada) at the time of the purchase or acquisition, or
• Spouse – A foreign national who jointly purchases residential property with a spouse, who is a Canadian citizen, permanent resident of Canada, nominee or protected person.

Under the Land Transfer Tax Act, spouse means “spouse” as defined in section 29 of the Family Law Act. This includes either of two persons who are married to each other, or who are not married to each other and who have cohabited,

• continuously for a period of not less than three years, or
• in a relationship of some permanence, if they are the natural or adoptive parents of a child.

To qualify for an exemption, the foreign national (and if applicable their spouse) must certify they will occupy the property as their principal residence.

The exemption applies if the Canadian citizen, permanent resident of Canada, nominee or protected person and his or her foreign national spouse purchased the property with other individuals who are Canadian citizens, permanent residents of Canada, nominees, or protected persons.

For the spousal exemption, multiple spousal units may also hold title, so long as one spouse is a Canadian citizen, permanent resident of Canada, nominee or protected person.

All transferees in the conveyance must also certify that they will occupy the property as their principal residence.

However, the exemption does not apply if the Canadian citizen, permanent resident of Canada, nominee, or protected person and his or her foreign national spouse purchased the property with another foreign national who is not a nominee or protected person. For example, if three parties purchase a property as follows:

• one Canadian citizen and his or her foreign national spouse, and
• a third party who is a foreign national (other than a nominee or protected person),

the exemption would not apply and NRST would be payable.

Exemptions in the Act and its regulations that apply to LTT will also apply to the NRST. The deferral and cancellation of LTT for intercorporate transfers between affiliated corporations will also apply to the NRST.

Rebates
A rebate of the NRST may be available in the following situations:

• Foreign national who becomes a permanent resident of Canada – The foreign national becomes a permanent resident of Canada within four years of the date of the purchase or acquisition
• International student – The foreign national is a student who has been enrolled full-time for a continuous period of at least two years from the date of purchase or acquisition in an “approved institution” (under section 8 of Ontario Regulation 70/17 of the Ministry of Training, Colleges, and Universities Act) at a campus located in Ontario. Full-time means enrolled in at least 60 per cent (if the individual does not have a disability) or 40 per cent (if the individual has a disability) of what the approved institution considers to be a full course load for the academic year, or
• Foreign national working in Ontario – The foreign national has legally worked full-time under a valid work permit in Ontario for a continuous period of at least one year since the date of purchase or acquisition. Full-time means an employment position that 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.

To qualify for a rebate, the foreign national must exclusively hold the property, or hold the property exclusively with his or her spouse. The property must also have been occupied by each transferee as their principal residence for the duration of the period that begins within 60 days after the date of the purchase or acquisition.

All NRST rebate applications are subject to audit. Fraud or misrepresentation that is attributable to neglect, carelessness or wilful default may result in a penalty, fine and/or imprisonment.

OWNER OCCUPATION or INVESTMENT RENTAL PROPERTY:
Is the property being purchased to be owner occupied or an investment property?

End User

If you plan on moving in and living in the new property, you must apply for the New Home Rebate (NHR).

Under an NHR, you’ll receive the HST rebate based on the fact that you (or a direct blood relative) will occupy the new property as the principal resident for at least the first year.

In the majority of cases, particularly when buying a pre-construction in the Greater Toronto Area (GTA), you’ll receive the HST rebate right away in the form of a discounted purchase price in the Agreement of Purchase and Sale. Most condo and home developers already factor the HST rebate into their price lists.

If the new property is sold before the initial one-year window, the Canada Revenue Agency (CRA) will require you to pay back the HST rebate in full, which can add up to as much as $30,000.

INVESTOR

If the HST rebate is already adjusted in the form of a discounted price in the Agreement of Purchase and Sale and you decide not to move in and live in the new property, you will be required to pay back the HST rebate in full at the time of closing in addition to the purchase price, however, you’re still eligible to receive the HST rebate on a new home. However, you must apply under the New Residential Rental Property Rebate (NRRPR).

To receive the HST rebate through an NRRPR, you must provide a one-year lease agreement in order prove the new home will be rented to a tenant for at least the first 12 months after closing.

The new home must be leased for at least the first year before it’s sold. If the investor flips the property before the one-year window closes, the HST rebate is no longer viable and the taxes must be paid in full.

Unlike an NHR, investors who file for a New Residential Rental Property Rebate must pay the entire HST upfront and will receive the rebate around two or three months after proof of the lease agreement has been submitted.

Prior to closing, you must arrange for fire insurance to be placed on the property.

If you are obtaining a mortgage, the lender must be noted as a loss payee on the policy and you will want to ensure that the policy provides “guaranteed replacement cost” as this is a requirement of most lenders. Your insurance agent will need to provide us with a Binder Letter or Certificate of Insurance showing that the insurance is in place.

In case of condominium, a condo coverage is usually included. However, we highly recommend our condo purchaser clients to buy additional coverage for the contents of their unit and any structural improvements therein.

MAIL: Remember to contact Canada Post to have your mail redirected to your new address. The number is 1-800-267-1177or visit www.canadapost.ca to search for your local Postal Outlet Location. This will allow you to find out where to pick up your mail.