Ontario Cracking Down on Foreign Real-Estate Speculation with the Most Comprehensive Non-Resident Speculation Tax in Canada

To tackle the housing crisis in Ontario and prioritize Ontario families and homebuyers, the government has decided to increase the Non-Resident Speculation Tax rate to 20 percent. It has also closed loopholes to fight tax avoidance and expanded the tax to apply provincewide. These changes became effective a few days back, on March 30, 2022.

Before March 30, the Non-Resident Speculation Tax rate was 15 percent and only applied to homes purchased in the Greater Golden Horseshoe Region by foreign corporations, foreign nationals, and taxable trustees. The latest changes will probably deter non-resident investors from speculating on Ontario’s housing market. It might also make homeownership more attainable for Ontario residents.

Also, the government will ensure that new permanent residents of Canada get rebates and exemptions (if they are eligible) to ensure Ontario is welcoming to new Canadians in the future. It’s a good opportunity for foreign nationals studying and working in Ontario who become permanent residents as they can easily apply for the rebate.

Peter Bethlenfalvy, Minister of Finance, stated, “Young families, seniors, and workers are desperate for housing that meets their needs. But a lack of supply and rising costs have put the dream of homeownership out of reach for too many families in the province. That is why our government is adopting the most comprehensive Non-Resident Speculation Tax in the country. Our government is working to increase supply and help keep costs low for Ontario families and homebuyers, not foreign speculators looking to turn a quick profit.”

Taxation on Renting

If a non-resident rents out a Canadian property, they need to withhold tax as 25% of the gross rental income. They have to withhold taxes even in situations of rental loss. However, non-residents can elect under s.216 of the income tax return to file a Canadian tax return which recalculates the withholding to only 25% on the net rental income and lets a person deduct normal expenses to be deducted. They still need to remit 25% of the gross rental income, but they can get a refund by filling the s.216 tax return.

What Entities are Subject to Subject to NRST?

The following entities or taxable trustees are subject to NRST if they purchased or acquired a residential property in Ontario.

A foreign entity includes a foreign national or a foreign corporation.

A foreign national refers to an individual who is not a permanent resident of Canada or a Canadian citizen.

A permanent resident refers to a person who has acquired permanent resident status and hasn’t lost that status.

A foreign corporation refers to any of the following:

Ø  A corporation not incorporated in Canada.

Ø  A corporation whose shares are not listed on a stock exchange in Canada but is incorporated in Canada and is controlled, directly or indirectly, in any manner whatever by a foreign national, a corporation not incorporated in Canada, or a corporation whose capital stock that is owned by a foreign national or by a corporation described above.

A taxable trustee means a trustee of:

Ø  A trust where at least one trustee that is a foreign entity.

Ø  A trust with no foreign entity trustees if a trust beneficiary is a foreign entity.

Ø  The taxable trustee does not include a trustee acting for these trusts- a mutual fund trust, a real estate investment trust, or a SIFT trust.

Read more about NRST at the website of Ministry of Finance here.






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