Who Owes Foreign Buyers Tax?

Published on 29 August 2022, 07:22:56 AM

Before you purchase homes or income properties, talk to your realtor about how the foreign buyer’s tax and real estate law in Ontario affect you. They could add substantially more to the cost of buying real estate in Ontario’s lucrative housing market. 

When you’re ready to buy, Axess Law has mortgage lawyers and real estate attorneys at great rates in Greater Toronto Area or Ottawa. 

Taxes for Foreign Buyers in Ontario

How much is the foreign buyer’s tax for Ontario real estate investors? That depends on how many homes you own and where.

Federal Home Buyers’ Tax

Buyers who purchase, then leave residential property vacant or underused anywhere in Canada will be charged a new one per cent foreign buyers tax, starting after Jan. 1, 2022.

The new Underused Housing Tax encourages foreign buyers living outside Canada to rent out housing they purchase from afar. Owners will be taxed annually unless they hire a property agent to rent out their unit or move in, making their new property their principal residence. See more on the new Canada tax. (Maychelle, link underlined text to the new article titled Foreign Owner: Who Owes Underused Housing Tax?)

Tax on Vacant Homes in Toronto 

Toronto levied a 1% annual vacant home tax on empty or underused property in January 2022. The tax is meant to spur homeowners into selling or renting vacant residential units. It discourages property speculation by making buying and keeping empty units even more expensive. 

Rates are based on a property’s annual current value assessment (CVA), and apply to homes vacant for six months or more (excluding snowbird properties, owned by residents who live elsewhere part of the year). More on Toronto’s vacant home tax. 

Submit property declaration forms annually to avoid fines or interest penalties. Bookmark the online declaration portal.

Non‑Resident Speculation Tax 

NRST is a 25 per cent tax on buying or acquiring interests in residential homes throughout Ontario. 

Who Pays It

Expect to pay if you are a non-resident, foreign corporation (also called a foreign entity), or taxable trustee with between one and six single family residences. 

Examples include:

• single family homes
• duplexes, triplexes, or fourplexes
• up to six units in a boarding house
• income properties with multiple suites
• condos or townhouses
• or multiple condo units.

NRST is paid on top of Ontario’s land transfer tax and Toronto’s municipal land transfer tax. Buy a rooming house (Toronto).

Is Anyone Exempt?

Rental buildings with more than six units and agricultural, commercial, or industrial land are exempt. NRST does not apply to mutual fund trusts, real estate investment trusts, or specified investment flow‑through trusts. But if you are business partners with a foreign buyer and they fail to pay NRST, you could be liable for the full amount — even if you own only a small share of a property. 

Did the NRST Increase?

The tax increased twice this year. On agreements of purchase and sale made before March 30, 2022, the NRST was 15% for properties located in Ontario’s Greater Golden Horseshoe region. That went up to 20% in the spring, for agreements made anywhere in Ontario between March 30 and Oct. 24, 2022.  The NRST jumped to 25% for all Ontario properties Oct. 25, 2022. Find a list of Greater Golden Horseshoe municipalities by scrolling to this map.  

Ask a tax lawyer if you need advice. Axess Law can refer you to trusted legal partners if you are being asked to pay taxes you believe you are exempt from.

Getting the NRST Rebate

Good news. You could get a NRST rebate if you offered to purchase a principal residence in the Greater Golden Horseshoe before March 29, 2022, moved in within 60 days of buying or acquiring it, and:

• change your status from foreign national to permanent resident within four years of buying property in Ontario,
• or enroll full-time in an approved Ontario institution for at least two years from the time you buy or take over a property, 
• or have a valid Ontario work permit and have been employed for at least a year, working 30 or more hours a week, after buying.

To see if you qualify, go to Transitional Provisions for Former NRST Rebates.

Temporary NRST Relief for Foreign Buyers

Travel restrictions during the pandemic have played havoc with foreign buyers and owners. 

Qualify for a NRST Rebate

The province recognizes some foreign buyers couldn’t move into their new home within the required 60 days because they couldn’t leave their own country or enter Canada. You may qualify for COVID administrative concessions for a principal residence the pandemic prevented you from occupying right away. You have up to four years from the date the NRST was due to apply for the rebate or, if you are now a permanent resident of Canada, 90 days after you become a permanent resident. 

How to Apply for Rebates

The COVID administrative concession is effective for residential homes bought between Jan. 17, 2020 and July 24, 2020. That means you must have been in your home by or before Sept. 22, 2020. Axess Law notary publics can witness and sign your Ontario Land Transfer Tax Refund/Rebate affidavit.

Why You Need a Real Estate Lawyer

Axess Law notarizes foreign buyer tax refunds or rebates if you own vacant property in Ontario. We can review if you qualify and check your application for completeness (extra fees apply for NRST rebate lawyer services).

Our real estate lawyers in Toronto and area or Ottawa review your agreement of purchase and sale before you buy. Or if you are renewing a mortgage for an income property you already own and need a mortgage lawyer to finalize refinancing documents, give us a call. Questions to ask a real estate lawyer.

Axess Law searches the title to property, checks for construction or financial liens and verifies easements that can affect how you use your property. If your deal doesn’t work out, Axess Law advises you if a real estate deal falls through who gets the deposit. 

Affordable Real Estate Lawyers, Anywhere You Are

Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.

Find a real estate lawyer in Ontario.

Book Online or In Person Appointments

You can make appointments online using our easy booking form or call our 1-647-479-0118 lawyer line for appointments (toll free to 1-877-407-4207). Visit us at any of our easy to get to Axess Law locations. We have open law offices near you, 7 days a week, for day or evening appointments. If you just can’t make it in, our real estate lawyers do remote video calls online anywhere in Ontario, to your home or office. 

We have onsite parking and easy transit access.