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All You Need to Know About the Toronto Foreign Buyer Tax

As housing prices continue to skyrocket in many bustling areas of Canada, some local legislators are attempting to find ways to use well-placed laws to restrict and reduce how rapidly rent and housing prices are rising.

In the case of Toronto, a Toronto foreign buyers tax was recently enacted in addition to a number of other pieces of legislation in an attempt to slow the rising costs that were making it impossible for current residents to buy in the area.

The Ontario foreign buyers tax is currently focused in the Greater Golden Horseshoe area, but all eyes are on the region to see how this type of tax works.

Let’s learn more about the tax itself, who it affects, and what you can do to avoid paying it.

What is This Foreign Buyer Tax & Why Does it Exist?

The Toronto Foreign Buyer Tax is a tax specifically for foreigners aiming to buy property in the Toronto region. The tax requires them to pay an additional 15% tax on top of all other costs associated with the property. Since being imposed, foreign-bought sales in the Toronto region have dropped from over 5% to just over 3%.

Officially titled the non-resident speculation tax (NRST), this tax is often referred to as the Toronto Foreign Buyer Tax.

Why Was This Tax Introduced?

The foreign buyer’s tax Ontario edition was introduced in an attempt to gain control over a housing market that was quickly becoming out of control.

With houses too expensive for anyone living in the area to buy, Toronto enacted a number of changes (including the foreign buyer tax in Toronto) with the goal of slowing down the rising costs.

The tax itself is not intended to dissuade new Canadians or those hoping to move to Canada from buying property. Instead, it is aimed at investors in the Toronto region.

Economists disagree about whether or not using a foreign investor tax in Toronto will be effective in helping to slow the rising costs, but foreign buyers will have to deal with the tax regardless of its effect until the law changes.

Who is Required to Pay the NRST Tax?

The NRST tax must be paid when the property is purchased by anyone who is not a citizen or a permanent resident of Canada unless they fit one of the exemption categories. In purchases with more than one person involved, the NRST tax will apply so long as any single individual involved in the purchase is a non-resident of Canada. Some exemptions apply to this rule though.

In some cases, it is possible that you will be required to pay the NRST tax in full when purchasing a property only to be able to get a rebate later on. Through the Ontario Land Transfer Tax Rebate program, rebates can happen within a certain set of parameters.

Foreign Buyer Tax Exemption Information

There are some exemptions from this rule for new Canadians and those who wish to make Canada their permanent home.

Some of these exemptions are as follows:

  • Tax does not apply if you are a permanent resident or citizen of Canada.

  • If you pay the tax but later become a citizen or permanent resident, you may be eligible for a rebate of what you paid. You must become a citizen within four years for this rebate to apply.

  • If you pay the tax but live or work in the area, you can apply for a rebate. You must have worked for at least one continuous year from the date of your property acquisition with a valid work visa to be eligible for a rebate.

  • Foreign students do not need to pay the tax if they are on an approved study period of at least one continuous year. The student must be enrolled full time.

  • Those applying for landed immigrant status do not need to pay the tax.

  • If you are a Canadian citizen living outside of Canada, you do not need to pay the tax.

  • Spouse: A foreign national who jointly purchases residential property with a spouse, who is a Canadian citizen, permanent resident of Canada, nominee or protected person.

  • Nominee – A foreign national who is nominated under the Ontario Immigrant Nominee Program (nominee) at the time of the purchase or acquisition, and the foreign national has applied or certifies that they will apply to become a permanent resident of Canada

  • Protected person – A foreign national on whom refugee protection is conferred (protected person) under section 95 of the Immigration and Refugee Protection Act (Canada) at the time of the purchase or acquisition.

Otherwise, every residential purchase made by non-citizens (including foreign corporations) will be taxed by Toronto. It is estimated that the tax only affects 1.5% of foreign buying parties that participate in real estate sales in the Toronto Area.

How Can I Find Out If I Am Exempt From The Tax?