Non-Resident Speculation Tax and how it affects relocation. What you should know!
All Points’ clients have been asking about the new Non-Resident Speculation Tax in Ontario. So, we wanted to share our preliminary summary of it, as soon as we could.
Here are the keys points:
- The new tax was announced on April 20 as part of a package of measures introduced by the Ontario Provincial Government to help cool down the hot housing market in Southern Ontario;
- It is a 15% tax on the purchase price of residential real estate paid at closing;
- The NRST applies in addition to the general land transfer tax in Ontario and the Municipal Land Transfer Tax in the City of Toronto;
- It is payable by buyers who are not citizens, permanent residents or Canadian Corporations;
- Applies to properties located in the Greater Golden Horseshoe (GGH) – a large area of south central Ontario including the Greater Toronto Area (GTA). Please see attached map;The new legislation has not been enacted (approved by the legislature of Ontario) yet, although its passage is not seriously in question due to the current majority government in place. But when it is enacted, it will be retroactive to April 21, 2017. Lawyers who close affected real estate transactions from April 21 until the legislation is enacted must follow steps to declare if the buyer is not a citizen or permanent resident and pre-pay the NRST to the Ministry of Finance.
- Binding agreements of purchase and sale signed on or before April 20, 2017 are not subject to the NRST;
- A rebate of the NRST may be available if the buyer is a foreign national who has legally worked full-time in Ontario for a continuous period of one year since the date of purchase and the property has been used as the foreign national’s principal residence for the duration of the period or; if the foreign national becomes a Canadian Citizen or Permanent Resident of Canada within four years of the date of the purchase or acquisition and the property has been used as the foreign national’s principal residence for the duration of the period.
All Points is disappointed that the Ontario Government did not choose to create a full exemption for the above categories, instead of merely a rebate.
According to a BNN report on their website http://www.bnn.ca/ontario-reportedly-going-to-place-15-per-cent-tax-on-foreign-buyers-to-cool-gta-housing-market-1.729268 the Premier of Ontario, Kathleen Wynne, said:
“The tax is not about targeting immigrants and a rebate would be available to people who subsequently get citizenship or permanent resident status, as well as foreign nationals working in Ontario and international students.
“The non-resident speculation tax has nothing to do with new Canadians and people who want to make Ontario their home,” she said. “With this tax, we are targeting people who aren’t looking for a place to raise a family — they’re looking only for a quick profit or a safe place to park their money.”
How does this affect relocations?
The decision by Ontario to provide a rebate for foreign nationals who work for one year, rather than provide them with an exception will create a deterrent to some who are being relocated to Ontario for employment, unless their employer is willing to cover the additional cost. There are a number of employees who view home ownership as a significant positive, and who want to purchase homes even in the first year of their relocation. A 15% tax will act as a deterrent to relocation for these recruits or transferees. Furthermore, this would also affect those employees who choose to purchase a home in the second or third year of their relocation, if still on a work permit and if they are moving from their current rental to a newly purchased home. Again, the lack of a financially viable path to home ownership could be enough for some employees and recruits to reject the relocation outright.
Those employees that are in the process of applying for their Permanent Residence should wait to obtain this before they purchase a home in the Greater Golden Horseshoe.
In addition, we preliminarily speculate that the impending legislation could have an impact on foreign relocation companies, which are, by definition, non-resident corporations. If, in a Guarantee Home Sale program, the relocation company has to register the deed on title (required in Ontario after 180 days in inventory), then the transaction will be subject to the NRST at 15%, in addition to the general land transfer tax in Ontario and the Municipal Land Transfer tax in the City of Toronto (depending on location of the property). We are still reviewing the legislation with legal counsel and will be able to report more on this at a later date.
As we learn more about this proposed legislation we will send out new relo-lerts. In the meantime, if you have any questions, please send them to All Points at [email protected]