The Non-Resident Speculation Tax (NRST) is a 25% tax in addition to the general Land Transfer Tax (LTT). This tax applies to residential properties purchased anywhere in the Greater Toronto for non-citizens and non-permanent residents of Canada who are buying a house in the province.
Who is subject to the 25% Non-Resident Speculation Tax?
– Foreign nationals: Individuals that are not Canadian citizens or permanent residents.
– Foreign corporations: Corporations not incorporated in Canada, or incorporated in Canada but with majority of foreign shareholders.
-Taxable Trustees: A foreign entity holding a title in trust for beneficiaries or a Canadian citizen, or a permanent resident, or a corporation holding a title in trust for foreign beneficiaries.
Who are exempt from Non-Resident Speculation Tax or may claim Rebate?
Certain situations are exempt from the ‘non-resident speculation tax, such as:
– Tax does not apply if you are a permanent resident or citizen of Canada.
– Becomes a Canadian citizen or permanent resident within four years of the purchase.
– The buyer is an international student enrolled in a full-time Canadian program for at least one continuous year after the purchase.
– A foreigner legally and continuously working in Ontario on a full-time basis for a year from the date of purchase.
– If you pay the tax but later become a permanent resident or citizen, you may be eligible for a rebate of what you paid. You must become a citizen within four years of the purchase to apply for the rebate.
– If you are a Canadian citizen living outside of Canada.
– Spouse: Foreign nationals who jointly purchase a residential property with a spouse who is a Canadian citizen, permanent resident of Canada, nominee or protected person.
– Property bought by refugees (protected persons).
– Foreign nationals who are nominated under the Ontario Immigrant Nominee Program (nominee) at the time of the purchase or acquisition, and the foreign nationals have applied or certified that they will apply to become a Canadian citizen or permanent resident of Canada.
How Much Tax Do Non-Residents Pay When They Buy Property in Toronto GTA?
In addition to the cost of their mortgage, there are several closing costs and fees non-residents may be responsible for paying. In terms of taxes specifically, the following taxes may apply to the purchase:
1- Toronto non-resident buyer’s tax.
2- Provincial land transfer tax.
3- GST/HST if the property is a new building.
4- Municipal level land transfer tax.
5- Sales tax on the purchase of mortgage insurance.
It is necessary to mention, all transfers of land in Ontario are subject to audit. Anti-avoidance provisions ensure that the ‘Non-Resident Speculation Tax’ is reported and paid as required. Thus, failure to pay the ‘Non-Resident Speculation Tax’ may result in a penalty, fine and/or imprisonment.
If you have any tax-related queries and need assistance with tax planning or filing your tax returns please contact us at zoodpm.
Keep in mind working with local management to find the right solution for your situation is possible, our team & partner accountant company comprises highly experienced property management and tax professionals with extensive knowledge of Canadian tax laws as well as cross-border compliance.