Last week, the Ontario Provincial Government introduced several measures designed to make housing more affordable and to cool the housing market in the Toronto area. This column will examine one of the most significant changes – the 15% Non-Resident Speculation Tax (NRST).
The NRST is a 15 percent tax on the purchase or acquisition of an interest in residential property located in the Greater Golden Horseshoe (GGS) by individuals who are not citizens or permanent residents of Canada or by foreign corporations and taxable trustees. The NRST applies in addition to the normal Land Transfer Tax (LTT) in Ontario. The NRST is effective as of April 21, 2017. However, binding Agreements of Purchase and Sale signed on or before April 20, 2017 are not subject to the NRST.
The NRST applies to a transfer of land which contains at least one and not more than 6 single family residences. Examples of properties that the NRST applies to are detached, semi-detached houses, townhouses and condominium units along with duplexes, triplexes, fourplexes, fiveplexes and sixplexes. The NRST does not apply to multi-residential apartment buildings with more than six units, agricultural land, commercial or industrial land.
For an interim period, the Ontario electronic registration system will not be able to collect the NRST. During this time, affected purchasers will be required to pre-pay both the Land Transfer Tax and the NRST directly to the Ministry of Finance office in Oshawa, Ontario. Once the pre-payment of taxes is made, the Ministry will provide a letter confirming receipt of the NRST with a receipt. There is a prescribed list of documentation which the Ministry requires in order to pay both the LTT and NRST.
Realtors who have purchasers who are not citizens or permanent residents of Canada, should advise their clients of this new tax and the necessity of paying the tax prior to closing during the transition period. Failure to do so could result in a non-resident purchaser not having enough funds to close its transaction, particularly where the closing date is imminent.