Buying a Home and Ontario’s Non-Resident Speculation Tax (NRST)

As the real estate market picks up, you’re likely focused on finding the right home and making a smart investment. What many non-resident buyers don’t realize is that a significant additional tax may apply when purchasing residential property in Ontario, creating unexpected financial pressure at an already demanding time. To help you avoid surprises and move forward with confidence, our team at Brown Beattie O’Donovan is here to inform you on Ontario’s Non-Resident Speculation Tax.

The Non-Resident Speculation Tax

In Ontario, the acquisition of residential real estate property by foreign entities and taxable trustees may be subject to a 25% Non-Resident Speculation Tax (NRST), unless a specific exemption or rebate applies.

The NRST was first introduced in 2017 and originally applied only to certain prescribed residential properties at a rate of 15%. On March 29, 2022, the rate increased to 20%. As of October 24, 2022, the NRST applies to all residential property in Ontario at a rate of 25%.

While earlier transactions were, and continue to be, subject to different rates, any residential purchase that closed on or after October 24, 2022, is subject to the 25% rate, unless an exemption or rebate applies.

The NRST is calculated based on the consideration for the conveyance of land, most commonly, the purchase price.

Example: If a property is purchased for $1,000,000, the NRST payable would be $250,000.

The NRST is a statutory tax. Its authority derives from subsection 2(2.1) of the Land Transfer Tax Act, with additional rules and exemptions set out in Ontario Regulation 182/17.

That Regulation contains five exemptions. The three most relied upon exemptions are discussed in this blog.

1. Nominee Exemption

A nominee is defined as a foreign national who is nominated under the Ontario Immigrant Nominee Program (OINP). The OINP allows Ontario to nominate skilled individuals for permanent residency based on the province’s economic and labour market needs.

The exemption applies if the land is conveyed to a nominee; any other transferee named in the conveyance are individuals who are Canadian citizens, permanent residents of Canada, other nominees, or protected persons; each transferee certifies that within 60 days after the conveyance is tendered for registration, they will occupy the land as their principal residence; and the nominee either certifies that they will become a permanent resident of Canada or has applied to become a permanent resident of Canada.

Example: Doe, a nominee, enters into an Agreement of Purchase and Sale. The only other transferees named in the conveyance are Jane Doe, a Canadian citizen, and John Smith, a permanent resident of Canada. Each transferee certifies that they will occupy the property as their principal residence within 60 days of registration of the conveyance. Doe further certifies that they will apply to become a permanent resident of Canada. As a result, no NRST is payable on such a transaction.

In this example, it is important to note that Doe can be the only transferee involved in the transaction, provided the applicable conditions are met.

2. Protected Persons Exemption

A protected person is defined as a foreign national on whom refugee protection is conferred under section 95 of the Immigration and Refugee Protection Act.

The exemption applies if the land is conveyed to a protected person; any other transferee named in the conveyance are individuals who are Canadian citizens, permanent residents of Canada, other nominees, or protected persons; and each transferee certifies that within 60 days after the conveyance is registered, they will occupy the land as their principal residence.

Example: John Smith has been granted status as a protected person, pursuant to section 95 of the Immigration and Refugee Protection Act. John Smith enters into an Agreement of Purchase and Sale. The only other transferee named in the conveyance is Jane Doe, a Canadian citizen. Both John Smith and Jane Doe certify that they will occupy the property as their principal residence within 60 days of registration of the conveyance. There is no requirement to certify that John Smith will become a permanent resident of Canada, as he has refugee status. Therefore, the exemption would apply.

In this example, it is important to note that John Smith can be the only transferee involved in the transaction, provided the applicable conditions are met.

3. Foreign National and Spouse Exemption

A spouse within this exemption has the same definition as it does in section 29 of the Family Law Act. Therefore, a spouse is either an individual in whom one has married, has cohabitated continuously for a period of not less than three years, or in a relationship of some permanence and have a child together.

The exemption applies if the land is conveyed to a foreign national and the foreign national’s spouse; at the time of conveyance, the spouse is either a Canadian citizen, a permanent resident of Canada, a nominee or a protected person; any other transferees named in the conveyance are individuals who are either (a) Canadian citizens, permanent residents of Canada, nominees or protected persons or (b) the spouse of an individual described in clause (a); and each transferee certifies that within 60 days after the conveyance is tendered for registration, they will occupy the land as their principal residence.

Example: Jane Doe, a foreign national, and her spouse, John Smith, a Canadian citizen, want to purchase a home as their principal residence. In the Agreement of Purchase and Sale, the two of them are listed as transferees. Jane Doe and John Smith certify that they will move into the home and occupy it as their principal residence within 60 days after the transfer is registered. Because Jane Doe, a foreign national, is acquiring the property with a qualifying spouse, John Smith, and all transferees satisfy the citizenship or spousal requirements and occupancy certification, the exemption applies.

Rebates

In addition to exemptions, certain foreign nationals may qualify for a rebate under Regulation 182/17, including:

• Rebate for foreign nationals who become permanent residents of Canada
• Rebate for international students
• Rebate for foreign nationals working in Ontario
• Rebate for land purchased for industrial use

It is important to note the Regulation’s use of the term “may”, which means that eligibility does not guarantee approval. Further, there has been a phasing out of rebates for international students and foreign nationals working in Ontario. Specifically, applications for these rebates had to be made on or before the earlier of:

• The fourth anniversary of the day on which the tax became payable
• March 31, 2025

If you, or your spouse, are new to Canada and considering purchasing residential property in Ontario, it is critical to understand the potential NRST implications before completing a transaction. Proper planning and legal advice can make a substantial difference—contact BBO’s real estate lawyers to get clear answers and make informed decisions before you buy.

This blog post is provided for general information purposes only and is not intended to be legal advice. Readers should consult a qualified legal professional regarding their specific circumstances.