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April 7, 2022
Canada | Ontario increases nonresident speculation tax rate and extends application provincewide
On 30 March 2022, Ontario filed Regulation 240/22, which implements amendments to increase the nonresident speculation tax rate to 20% (from 15%) and extend the application of the tax provincewide. As well, tax rebates for international students and foreign nationals working in Ontario have been eliminated. These measures apply to conveyances of land tendered for registration on or after 30 March 2022, subject to transitional measures. The stated purpose of these measures is to reduce foreign residential real-estate speculation and help make Ontario homeownership more affordable for Ontario residents.
As part of its Fair Housing Plan,1 Ontario implemented a 15% nonresident speculation tax (NRST), applicable to transactions occurring on or after 21 April 2017. Ontario introduced the NRST in response to sharply rising prices for residential housing, especially in the Greater Toronto Area. The NRST, which is levied under the Land Transfer Tax Act (LTTA), applies to purchases of residential property2 located in the Greater Golden Horseshoe Region of southern Ontario if the purchaser is a foreign national (i.e., an individual who is not a citizen or permanent resident of Canada), a foreign corporation or a taxable trustee.3 The NRST is levied on the value of the consideration for the residential property and applies in addition to the general tax levied under the LTTA.
In a news release dated 29 March 2022, Ontario announced it would amend the NRST to:
On 30 March 2022, Ontario filed Regulation 240/22, which amends regulations made under the LTTA4 to implement the above-listed measures. These amendments apply to conveyances of land tendered for registration on or after 30 March 2022, subject to transitional measures.
Foreign nationals may continue to claim a rebate if they become permanent residents of Canada within four years after the tax becomes payable, provided certain additional conditions are also met. As well, Ontario is retaining NRST exemptions for nominees under the Ontario Immigrant Nominee Program, protected persons (refugees) and spouses of individuals who are not subject to the NRST.
The NRST will continue to apply at the rate of 15% in respect of conveyances of land tendered for registration after 29 March 2022 if:
The NRST will not apply to a conveyance of land that is located outside the Greater Golden Horseshoe Region if:
International students and foreign nationals working in Ontario may no longer claim NRST rebates for conveyances of land occurring after 29 March 2022, subject to the exception applicable to certain foreign nationals, as noted above. A rebate remains available if:
Rebate applications must be submitted on or before the day that is four years after the day the tax becomes payable or 31 March 2025, whichever is earlier.
In addition to the NRST amendments, Ontario indicated it is engaging in other efforts to increase housing supply. For example, the province is working with municipalities that wish to implement a vacant home tax in accordance with the Municipal Act. The city of Toronto has already implemented such a tax, and other municipalities are preparing to follow suit. Ontario indicated it will consult with municipal representatives to facilitate the sharing of information and best practices.
For additional information with respect to this Alert, please contact the following:
Ernst & Young, LLP (Canada)