The Non-Resident Speculation Tax (NRST) is imposed on the buying or obtaining of a interest in residential property situated in Ontario by individuals who are not Canadian citizens or permanent residents, or by foreign corporations or taxable trustees. As of October 25, 2022, the NRST rate stands at 25%. “The NRST is applied to the value of the consideration for a conveyance.” (Ontario.ca).
(NRST) is applicable to foreign entities or taxable trustees when they buy or obtain residential property in Ontario. These individuals or entities making the purchase are referred to as transferees.
Types of property subject to NRST
The Non-Resident Speculation Tax (NRST) applies to the transfer of “designated land,” which includes land with one to six single-family residences. Examples range from detached houses to duplexes, triplexes, and so forth. Even cottages and cabins qualify. The zoning of the land doesn’t matter, but residences on agricultural land aren’t included. If multiple units or structures are transferred together, NRST may apply. However, it doesn’t apply to other land types like multi-residential rental buildings, agricultural, commercial, or industrial land.
NRST is levied on the residential property’s value portion in a transaction, even if there are non-residential components. Taxpayers must reasonably assess and apportion the value between residential and non-residential parts, with exclusive non-residential use necessary for apportionment. The apportionment is based on the value, not square footage.
Take for example a transaction where the value of the consideration is $3,000,000 and the land contains:
· one single family residence with a value of the consideration of $1,400,000
· land used for commercial purposes with a value of the consideration of $1,600,000
In the above example, the NRST would apply to only the $1,400,000 portion. (Ontario.ca)
Who pays NRST
NRST is applied to the entire value of residential property transferred if any of the transferees are foreign entities or taxable trustees. For instance, if three individuals buy a property together and one of them is a foreign national, NRST is charged on the entire transaction, not just the foreign national’s share. Each transferee is responsible for paying their portion of the NRST. If a foreign entity or taxable trustee fails to pay, the other transferees, regardless of their citizenship or corporate status, are liable for the tax.
Rebate and refund of the NRST
Registered transfers may qualify for an NRST rebate if the transferee becomes a permanent resident of Canada. To be eligible, the property must be located within Ontario’s Greater Golden Horseshoe Region, and the purchase agreement must have been signed on or before March 29, 2022, without being assigned to others afterward. Foreign nationals might be eligible for either the International Student NRST Rebate or the Foreign National Working in Ontario NRST Rebate under these conditions.
Tax avoidance and offences
Every land transfer in Ontario is liable to undergo an audit.
To ensure compliance with NRST reporting and payment obligations, anti-avoidance measures will be rigorously enforced. This encompasses reviewing scenarios where Canadian citizens or permanent residents of Canada, acting as taxable trustees, manage property in trust for a foreign entity. It also involves preventing the exploitation of multiple conveyances to evade NRST obligations.
Non-compliance with NRST payment requirements may lead to penalties, fines, and/or imprisonment.
Interest
NRST interest compounds daily, and interest rates are reset every three months.
Interest for an NRST rebate or refund starts accruing 40 business days after the ministry receives a complete application for the rebate or refund. The only deviation is for refunds arising from successful objections or appeals against NRST assessments, where interest begins the day after payment.
An application for an NRST rebate or refund is deemed incomplete until all supporting documentation is received by the ministry. The 40-business day period commences only after all necessary information and documentation for the rebate or refund application have been received.
For any question about NRST please contact us at +19055085007
- More information about value of the consideration: https://www.ontario.ca/document/land-transfer-tax
- More information on calculating the value of the consideration on the purchase of a newly constructed home: https://www.ontario.ca/document/land-transfer-tax/determining-value-consideration-transfers-new-homes
- More information about Rebate and refund of the NRST: https://www.ontario.ca/document/non-resident-speculation-tax/non-resident-speculation-tax-rebates-and-refunds
- More information about interest rates on NRST refunds and rebates: https://data.ontario.ca/dataset/tax-interest-rates
