The Ontario Non-Resident Speculation Tax (NRST) has gone through several changes throughout 2022. This article will summarize the changes as of the end of 2022 going into 2023.
Summary of NRST changes throughout 2022.
- Before March 30th 2022, the tax rate was 15% and it applied to the “Greater Golden Horseshoe” area. NRST rebate available for foreign nationals who become PR within four years, student enrolled for at least two years from the date of purchase, or legal full time working in Ontario for one year from the date of purchase.
- From March 30th 2022 to October 25th 2022, the tax rate increased to 20% and it applied province wide. Rebate ONLY available for foreign nationals who become PR within four years.
- Since October 25th 2022, the tax rate increased to 25%.
If you want to read the Ontario government’s information on the Non-Resident Speculation Tax, this is their official website.
Who is liable for the NRST
The NRST applies to foreign entities and taxable trustees that purchase certain types of residential property located in Ontario.
There is a transitional provision that exempts property outside of the Greater Golden Horseshoe if the agreement of purchase and sale was entered into before March 30th 2022.
Foreign entities include individuals who are not Canadian citizens or permanent residents and foreign corporations. Taxable trustees are those who have at least one trustee who is a foreign entity or a beneficiary of the trust is a foreign entity.
Property subject to the NRST
The NRST applies to property that contains at least one, but less than seven, single family residences. Single family residences include detached houses, semi-detached houses, townhouses, and condominium units. This also includes duplexes, triplexes, fourplexes, fiveplexes, and sixplexes.
Therefore, buildings that contain seven or more single family residences (ie. rental apartments), commercial, vacant, and industrial land are excluded from the tax.
How the NRST is calculated and paid
The NRST rate is 25% of the value of the consideration for the residential property. In most cases, this will be the agreed upon sale price on the APS.
Again, transitional provisions apply to if the APS was entered into prior to the dates outlined above.
The NRST also applies to 100% of the value of the consideration even if the foreign entity only owns a portion of the property being purchased. Each purchaser is jointly and severally liable for any NRST payable.
The NRST will be paid as part of the lawyer closing process. The transferee will need to provide the lawyer with the NRST amount with the down payment of the property.
NRST Exemptions
The following NRST exemptions apply and they have not changed throughout 2022:
- If the foreign national is a nominee of the Ontario Immigrant Nominee Program at the time of purchase and the property is used as the foreign national’s principal residence.
- If the foreign national is a convention refugee under IRPA at the time of of purchase.
- If the foreign national is jointly purchasing with a spouse who is a Canadian citizen, permanent resident, Ontario Immigrant Nominee Program nominee, or refugee.
NRST Rebates
If a foreign national bought a property after March 29th, 2022, the only rebate available is if the foreign national becomes a Canadian permanent resident within four years of the date of purchase. The date of purchase meaning the closing date of the property transaction when the transfer/deed is registered by the lawyer.
The requirements of the permanent resident rebate are as follows:
- the foreign national must become a Canadian permanent resident within four years of the date of purchase,
- the property must be owned only by the foreign national or by the foreign national with their spouse,
- the property must be used as the foreign national’s principal residence for the entire period, and
- the rebate application must be received by the Ontario Ministry of Finance within 90 days of the foreign national becoming a permanent resident of Canada.
NRST Rebate transitional provisions
Transitional provisions apply for the student and worker rebates if the APS was entered into prior to March 29th 2022 but the complete application must be submitted by the earlier of:
- four years after the date of purchase, or
- March 31st, 2025.
NRST Rebate Application Procedure
When we apply for the NRST rebate, we usually include it with any Land Transfer Tax (LTT) rebate for first time home buyers if applicable (see below for more details on timeline).
A complete rebate application should have the following:
- Ontario Land Transfer Tax Refund/Rebate Affidavit
- Registered transfer
- APS, and/or assignment documents with all schedules attached.
- Statement of Adjustment
- Proof of payment of the LTT and NRST
- Proof of occupancy as principal residence with 60 days of closing
- Proof of status as permanent resident (or fulfilment of study or work requirements if applying for the transitional rebates)
In most cases, the applicant should have most of the documents required to submit the rebate application but if not, they should follow up with the lawyer they used for closing who will have the Transfer, statement of adjustment, Teraview docket summary, etc. Note that most lawyers will charge an additional legal for the rebate application process because it is not included in their original retainer.
Proof of occupancy could include utility, phone, credit card statements, delivery slips, moving invoice, etc. that support the use of the property as the foreign nationals principal residence throughout the ownership period. The government gives a grace period of 60 days but it is expected that the applicant must be able to prove they moved into the property within this time.
Proof of status for permanent resident status would be a PR card or the Confirmation of PR document.
For the transitional rebate provisions for students, a study permit, an official transcript showing full time study for two years after the date of purchase and invoices to show tuition payments is generally sufficient. A school letter confirming enrollment would also be advisable in some situations.
For the transitional rebate provision for workers, work permit, T4s, pay stubs, and an employer letter confirming employment is generally sufficient.
Other Considerations
If the foreign national is also a first-time home buyer, they may be eligible for the LTT rebate from Ontario and/or Toronto if applicable. The rebate only applies if the foreign national becomes a permanent resident and the deadline for application is more strict than the NRST. The deadline to apply for the LTT rebate for first time home buyers is within 18 months of the date of purchase.
It is very important to make sure these rebate applications are complete because processing time can take almost a full year. If an incomplete application is submitted, it could take months before the problem is detected and by that time, the time limits above could be exceeded. If you need help, please reach out to us.
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