What is the Foreign Buyer Ban?
Effective January 1, 2023, the Government of Canada is implementing a two (2) year foreign buyer ban. This means that ONLY Canadian citizens/permanent residents will be allowed to buy residential property in Canada. There are some exceptions to the ban. For example, if a non-Canadian is purchasing with their Canadian spouse, or the agreement to purchase was signed prior to January 1, 2023.
Assuming the non-Canadian is allowed to purchase due to an exception, the non-Canadian must still pay a Non-Resident Speculation Tax (NRST).
Non-Resident Speculation Tax (NRST)
The NRST is an additional tax that applies in Ontario to non-Canadian owners only. The tax is expected to reduce the number of properties being purchased by non-Canadians, thereby increasing the housing supply for Canadians.
When the NRST was first introduced in Ontario, it was 15% of the purchase price and applied only to properties within the Greater Golden Horseshoe. Then in early 2022, the NRST was increased to 20% and the scope of applicable properties was broadened to include all of Ontario. Less than 7 months later, the NRST was again increased, to 25%.
The rate of NRST that a foreign buyer pays depends on when the agreement to purchase was signed. Non-Canadian buyers who signed agreements on/after October 25, 2022 will pay an additional 25% of the purchase price; those who signed agreements between March 30, 2022-October 24, 2022 will pay 20%; and those who signed agreements on/before March 29, 2022 will pay 15% only if the property is within the Greater Golden Horseshoe (if not, then there will be no NRST payable).
Exemptions to the NRST – NRST is Not Paid at All
An exemption from the NRST may be available if the non-Canadian is buying a property with their Canadian spouse. In order to qualify for this exemption, both spouses must own the property together, with no other non-Canadians, and all owners must certify that they will occupy the property as their principal residence.
There are two other exemptions, one for those in the Ontario Immigrant Nominee Program, and another for those who have protected person status under the Immigration and Refugee Protection Act (Canada). The criteria to qualify is similar to the spousal exemption.
Rebates of the NRST – NRST is Paid Upfront, but then Apply to Get it Back
In some cases, the NRST must be paid to the Ministry at the time of purchase, but if the non-Canadian becomes a permanent resident within four years, they may apply to get this tax back. In order to qualify for this rebate, the non-Canadian must hold the property alone or with their spouse only, and occupy the property as their principal residence the whole time. The application for the rebate must be made within 90 days of becoming a permanent resident.
The NRST rules have changed a number of times over the last 7 months. As a foreign buyer, it is important to know how much you will potentially pay, and even more important to know whether you qualify for any exemptions or rebates.
If you have any questions about the foreign buyer ban or if you wish to apply for a rebate of the NRST, please contact us at (416) 203-6347 or firstname.lastname@example.org for a quote. We invite you to try our easy-to-use Closing Cost Calculator.
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Written by Rishi Sharma, Lawyer at We Are Law.