From Far and Wide: How the Ontario NRST Affects International Property Investors | Antonio DiMinno

The Non-Resident Speculation Tax (NRST) is a tax implemented by the Ontario government in Canada. As of October 25, 2022, the NRST rate is 25% and applies to foreign nationals (individuals who are not Canadian citizens or permanent residents), foreign corporations, or taxable trustees who purchase or acquire residential property in Ontario. This tax is in addition to the general Land Transfer Tax (LTT) in the province.

Prior to this date, the NRST rate was 20% from March 30, 2022, to October 24, 2022, and 15% before March 30, 2022, but only in the Greater Golden Horseshoe Region (GGH) of Ontario.

The NRST does not apply to certain types of trusts, agricultural land, commercial land, or industrial land. It applies specifically to designated land containing one to six single-family residences, such as detached houses, townhouses, and condominium units.

NRST, or Non-Resident Speculation Tax, is applied to the consideration value when transferring residential property involving a foreign entity or taxable trustee. For instance, if a property is transferred to multiple parties, with one being a foreign entity holding a 25% share, NRST is applied to the entire consideration value, not just the foreign entity’s share. All transferees are jointly and severally liable for NRST payment, even if they are Canadian citizens or permanent residents. This means that, even if YOU are a resident/citizen, the CRA can come after you for any unpaid NRST that a co-owner of a property owes!

Example

Imagine a group of friends, Alex, Jamie, Riley, and Taylor, decide to invest in a duplex together, with each holding a 20% stake. The property’s value is $2,000,000. Alex, Jamie, and Riley are Canadian citizens, but Taylor is a foreign national. Since one of the co-owners is a foreign entity, the NRST is applied to the entire $2,000,000 value of the property, not just Taylor’s share. As a result, the NRST payable would be $500,000. All four friends are jointly and severally liable for paying the NRST, even though three of them are Canadian citizens. So, if Taylor sells his share to someone else, the other three owners above can be on the hook for the $500,000! 

NRST exemptions are available for certain cases in Ontario, Canada. Foreign nationals nominated under the Ontario Immigrant Nominee Program, protected persons, and spouses of Canadian citizens or permanent residents may qualify. For nominees, they must apply for permanent resident status before their certificate expires. All co-owners, in these exemption cases, must certify they will use the property as their principal residence. Exemptions won’t apply if a taxable trustee is involved in the transaction. The definition of a spouse, for NRST and LTT purposes, is defined in section 29 of the Family Law Act. Supporting documentation may be required for NRST exemption claims.

Have questions or concerns about the Non-Resident Speculation Tax and its’ consequences for your real estate? Contact us anytime for a free strategy session!

Antonio DiMinno

647-205-9128

antonio@drlawyers.ca

Contact us today for a free strategy session!

Disclaimer: All number figures are approximate only and may be subject to change. Like all material on this website, this is not financial, legal, or tax advice. Contact a professional for your specific situation.