AUGUST 08, 2017
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Foreign Nationals Can Legally Avoid Ontario's Foreign Buyer Tax
Original Newsletter(s) this article was published in:
Blaneys on Immigration: August 2017
Overview
On April 20, 2017, the Ontario Government
announced plans to impose a 15% tax on foreign nationals, in order to cool the real estate market in the Greater Toronto Area. The
Non-Resident Speculation Tax (“NRST”) was implemented on April 21, 2017.
As of April 21, 2017, the NRST now applies to all transfers of residential real estate located in the Greater Golden Horseshoe (“GGH”) region by (a) individuals who are not citizens or permanent residents of Canada, (b) foreign corporations, and (c) taxable trustees. The term “foreign corporation” is defined as one of the following:
- A corporation that is not incorporated in Canada.
- A corporation, the shares of which are not listed on a stock exchange in Canada, that is incorporated in Canada and is controlled, directly or indirectly in any manner whatever, by one or more of the following:
- A foreign national;
- A corporation that is not incorporated in Canada; or
- A corporation that is collectively controlled by foreign nationals or corporations that are not incorporated in Canada.
The term “taxable trustee” is defined as the trustee of:
- A trust with at least one trustee that is a foreign entity; or
- A trust having a beneficiary who is a foreign entity.
The GGH includes the following geographic areas: (a) City of Barrie, (b) County of Brant, (c) City of Brantford, (d) County of Dufferin, (e) Regional Municipality of Durham, (f) City of Guelph, (g) Haldimand County, (h) Regional Municipality of Halton, (i) City of Hamilton, (j) City of Kawartha Lakes, (k) Regional Municipality of Niagara, (l) County of Northumberland, (m) City of Orillia, (n) Regional Municipality of Peel, (m) City of Peterborough, (n) County of Peterborough, (o) County of Simcoe, (p) City of Toronto, (q) Regional Municipality of Waterloo, (r) County of Wellington, and (s) Regional Municipality of York. The NRST clearly extends far beyond the geographical limits of the City of Toronto.
Sales of residential real estate in the Greater Toronto Area
plummeted after the NRST came into effect. However,
it is still unknown whether this drop in sales is the direct result of foreign buyers deciding to buy elsewhere or the indirect result of prospective home buyers who decided to take a step back because of the uncertainty caused by this measure.
Of course, uber-wealthy foreign nationals do not appear overly concerned, since
sales of houses selling for more than $4 million continued to climb after the NRST was first implemented. However, the NRST can be an inconvenience for other foreign nationals who wish to purchase residential real estate in the GGH. Some of these foreign nationals may wish to acquire residential real estate for investment purposes but many others will be motivated by a work relocation or an enrollment at a post-secondary educational institutional in the GGH. Fortunately, there are still some exclusions, exemptions, and rebates available.
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