REAL ESTATE TAX EXEMPTIONS OR REBATES FOR NON-RESIDENTS

In April 2017, the Government of Ontario introduced the Non-Resident Speculation Tax, to foreign and non-resident property buyers as a measure to control the real estate market in the Greater Toronto Area (GTA). 

The 15% tax, more commonly referred to as the “NRST” applies to all residential real estate purchase or acquisition of an interest in residential property  located in the Greater Golden Horseshoe (GGH) region, that goes beyond the GTA geographical zone, and pertains to foreign individuals who are neither Canadian permanent residents or citizens. Furthermore, the bill includes foreign corporations that are neither registered in Canada or controlled by a Canadian individual or board of directors and foreign entities with taxable trustees, or their beneficiaries.

The NRST which is over and above the Land Transfer Tax, was intended to cool the real estate market in Ontario and support housing affordability by targeting foreign speculators and property purchasers. Since implementing the bill, the real estate market in the GTA has plummeted. 

In this article, we examine the scenarios in which foreign nationals can be exempted, legally avoid or be entitled for a full NRST rebate. 

It is very simple!

In cases of exclusion, the NRST does not apply to the following: 

1. Non-residential real estate, such as commercial properties. 
2. Purchases of property that are off-plan due to no transfer duties until the completion of the project. If foreign nationals becomes a permanent resident prior to the title transfer, automatically the NRST does not apply to them;
3. Foreign nationals who are a shareholder or beneficiary of a Canadian corporation or trustee, as long as they are not controlling the legal entities. 

There are limited exemptions which include: 

1. A foreign national who holds a nomination certificate under the Ontario Immigrant Nominee Program (OINP) at the time of the purchase or acquisition; 
2. Refugees or protected persons who is conferred under the Immigration and Refugee Protection Act;
3. A foreign national spouse of a Canadian permanent resident or citizen, where both have jointly purchased the property, as their principal residence.  

A larger number of foreign nationals are entitled for a rebate. To apply for a rebate, one must meet the following eligibility criterias: 

1. Be a potential Canadian permanent resident candidate, student or foreign work worker in Canada; 
2. hold the title of the property exclusively or with a spouse; 
3. apply for a rebate within four years after they paid the NRST; and 
4. the property is their principal residence for at least 60 days after the date of purchase.

Based on the above, eligibility is further categorised as follows: 

1. Potential permanent residents refers to those who have not yet become a Canadian permanent resident but intend on applying within four years of purchasing their property. The applicant must apply for the rebate within 90 days of becoming a Canadian permanent resident within the four years. For example, those visiting Canada whose PR applications are under process. 
2. International students refers to those who have been enrolled full-time for a continuous period of at least two years in a designated post-secondary institution in Ontario from the date of purchase or acquisition. Parents of such students can avoid paying NRST by purchasing the property in their children’s name instead of theirs.
3. Temporary foreign workers are those who have worked full-time for at least one year continuously, or equivalent to 1 560 paid hours under a valid work permit in Ontario since the date of purchase or acquisition. In this case, the purchaser may apply for a rebate immediately after paying the tax.

The real estate market in Ontario is irrefutably one of the most stable and lucrative industries in the country, citing an approximately 20% increase in value year on year, in spite of the repercussions caused by COVID-19.

As an expert in property and immigration law, my advice to those foreign nationals who are wishing and have the ability to purchase a residential property in Ontario, should do so and not be discouraged by the NRST, as there are many ways to work around this, as stipulated above. 

Therefore, instead of waiting for Canadian permanent residency to avoid paying the NRST, it would be economically more viable to rather later seek a full rebate, meanwhile gain a capital income from a profitable real estate investment.