Guide to Ontario Non-Resident (Foreign Buyer) Speculation Tax

Although legislation has not been enacted yet, all indications are that the rules will be worded broadly to catch foreign buyers whether they purchase directly, through corporations, or by using a Canadian citizen or permanent resident to hold title.

You will likely have to pay the NRST if you answer “Yes” to EACH of the following three questions:

Question 1: Are you a foreign entity or a trustee for a foreign entity (“Taxable Trustee”)?

• You are “foreign entity” if you are an individual who is not a Canadian citizen or permanent resident under Canadian immigration laws. This is not the same as whether you are Canadian-resident for tax purposes.
• Foreign entity includes corporations that are not incorporated in Canada (except public companies listed on Canadian stock exchange), corporations are incorporated in Canada but that are wholly or partially controlled by foreign entities, and corporations controlled directly or indirectly by a foreign entity for income tax purposes.
• You are a Taxable Trustee if you are a foreign entity and hold title to the property for someone else, the beneficial owner.  You are also a Taxable Trustee if you are a Canadian citizen, permanent resident of Canada, or a corporation holding title in trust for foreign entity beneficiaries (there is an exception for trustees of widely-held investment vehicles such as real estate investment trusts).

These rules have the potential to catch buyers by surprise. The province provides the following example:

If a transfer of residential property is made to four transferees, one of whom is a foreign entity that acquires a 25 per cent share in the land, the NRST would apply to 100 per cent of the value of the consideration for the transfer.

In other words, a single foreign entity “taints” the purchase and makes the entire price subject to the NRST. You, as the Canadian citizen buyer, are jointly and severally liable with the foreign entity to pay the NRST. Guess who the government is more likely to go after. Therefore, if you are buying property with someone else (other than your spouse – see exemption below), check if they are a foreign entity, foreign corporation or Taxable Trustee. Buyers who need someone on title to qualify for financing should get legal advice on the consequences if that person is a foreign entity.

Note the NRST also applies to unregistered transfers of a beneficial interest to foreign buyers. This may occur, for example, if a Canadian citizen initially purchases a property without being required to pay NRST and subsequently gives a beneficial interest to a foreign entity without putting them on title.

To assist in enforcing the NRST, the government has made it mandatory after May 5, 2016 to provide a statement on (among other things) buyers’ citizenship, immigration status, and information about any beneficial owners. This statement will be required in order to close a purchase.

Question 2: Are you are buying a residential property with 6 or fewer units?

• The NRST applies to purchases of residential properties that contain at least one and no more than six single family residences such as detached and semi-detached houses, townhouses and condominium units.
• This would also include duplexes, triplexes, fourplexes, fiveplexes and sixplexes. Buyers who purchase more than six units at the same time, e.g., multiple units in a condo, should get legal advice on whether the NRST applies.
• The NRST is not intended to apply to multi-residential rental apartments, agricultural land, or commercial land.

Question 3: Are you are buying within the Greater Golden Horseshoe Area?

• The so-called GGHA is a broad area surrounding Toronto comprised of the following towns and cities: Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington and York.

Ontario’s new 15% non-resident speculation tax will apply to certain sales of real estate within Toronto and surrounding areas, dubbed the Greater Golden Horseshoe Area.