Ontario’s real estate market can present a rewarding opportunity for non-residents buying or selling property, but it requires careful planning and expertise. There are a few considerations that a non-resident buyer or seller could consider to avoid costly mistakes:
Non-Resident Sellers: Certificate of Compliance
If you are a non-resident selling property in Ontario, obtaining a Certificate of Compliance (the “Certificate”) from the Canada Revenue Agency (CRA) is mandatory. This ensures that any applicable taxes you may owe are settled. If you are closing the sale transaction without this Certificate, CRA requires that 25% of the sale price is withheld until the Certificate is issued, which can take months to obtain from CRA following closing.
Typically to secure the Certificate, you must file a Form T2062 within 10 days of the sale. You could consult an accountant to navigate the filing process and discuss potential penalties for late filing. More information can be found here and here.
Non-Resident Buyers: “Foreign Buyer Ban” and/or Non-Resident Speculation Tax (“NRST”)
Non-Resident Speculation Tax
The Non-Resident Speculation Tax (NRST) applies on the purchase or acquisition of an interest in residential property located anywhere in Ontario by individuals who are foreign nationals (individuals who are not Canadian citizens or permanent residents of Canada) or by foreign corporations or taxable trustees. The rate of the NRST is 25% and applies in addition to (calculated separately from) the Land Transfer Tax (LTT) in Ontario. NRST is payable unless all of the requirements for an NRST exemption are met.
Foreign Buyer Ban
On January 1, 2023, the Government of Canada enacted the Federal Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Foreign Buyer Ban”). This legislation prohibits a “non-Canadian” from purchasing any “residential property”, both of which are defined in the Act. There are also various exceptions listed in the Act. For example, non-Canadians may be able to purchase residential properties located outside of a Census Metropolitan Areas (CMA) and Census Agglomerations (CA). To determine if a property is located outside this area, the address of the property can be entered here. More information about the “Foreign Buyer Ban” can also be found here.
The prohibition is a federal measure that operates separately from Ontario’s Non-Resident Speculation Tax (NRST). So, someone who falls within an exception under the federal prohibition may not be exempt from Ontario’s NRST.
Non-Resident Ownership: Ongoing Considerations
Depending on the property’s location, a non-resident may also need to account for additional municipal taxes to acquire a property, such as the Municipal Land Transfer Tax (MLTT) and Municipal Non-Resident Speculation Tax applicable in Toronto. Once a non-resident owns a property, they may need to consider the Vacant Unit Tax currently applicable in Toronto, Ottawa and Hamilton, which relates to properties that are left unoccupied for a certain period of time.
Whether you are a buying or selling, entering real estate transactions as a non-resident involve complex legal and financial considerations. While the above considerations could be helpful to a non-resident, they are provided as general information only. You should seek professional advice for your specific circumstances to ensure compliance with and an understanding of “the rules” to make the most of your investment. You could also obtain accounting advice in your home jurisdiction to understand how a real estate transaction in Ontario might affect your overall tax situation abroad.
This blog post was written by Brandon Doughty, a member of the Real Estate and Wills and Estates teams. He can be reached at 613-369-0364 or at brandon.doughty@mannlawyers.com.
