Buying property in Canada as a non-resident can feel overwhelming due to the ever-changing rules. The process involves not just understanding real estate logistics but also grasping the full scope of federal and provincial tax rules. Additionally, these rules can vary depending on where you intend to buy in Canada. The Canada foreign buyer tax is a key element here, having evolved recently to influence who buys property and what they pay directly. To know more about it, keep reading this blog.
Understanding Foreign Buyer Taxes in Canada
Across Canada, foreign buyer’s tax is imposed on certain non-resident individuals at the time of a home’s closing in Ontario, specific parts of British Columbia, and Nova Scotia. This non-resident tax in Canada varies by jurisdiction. For instance, in Ontario, it’s termed the Non-Resident Speculation Tax (NRST) and requires a 25% tax on the property’s value. British Columbia levies an additional property transfer tax, set at 20% of the home’s fair market value. Nova Scotia stands apart with its Non-resident Deed Transfer Tax, which requires foreign purchasers to pay an additional 5% of the purchase price or assessed value, whichever is higher, significantly impacting Canada home sales.
The complexities of the foreign buyer’s tax in Canada often necessitate professional guidance, as its specific application and potential exemptions can significantly impact the property acquisition costs and feasibility of non-residents.
Ontario’s Non-Resident Speculation Tax (NRST)
Ontario was one of the first provinces to introduce a provincial tax on foreign buyers to cool down hot housing markets. Initially launched as a 15% tax in select areas, it was later extended province-wide and raised to 25%.
If you’re a foreign national, that is, neither a Canadian citizen nor a permanent resident, and you buy a residential property in Ontario, you pay an extra 25% on top of the standard property tax in Ontario, Canada, and the land transfer tax.
Understanding Federal Foreign Buyer Ban
Responding to concerns about Canadian residents being priced out of their own housing markets foreign buyer ban in Canada on residential property initially took effect on January 1, 2023, following the parliamentary passage of the Prohibition on the Purchase of Residential Property by Non-Canadians Act on June 23, 2022. This legislation explicitly prohibits non-Canadian individuals and commercial entities from directly or indirectly acquiring residential real estate nationwide. In a move to further bolster housing affordability, Deputy Prime Minister and Minister of Finance Chrystia Freeland announced on February 4, 2024, a two-year extension of this federal prohibition. Originally set to expire on January 1, 2025, the ban on foreign ownership of Canadian housing will now remain in effect until January 1, 2027, maintaining the restriction on purchases by non-citizens or non-permanent residents.
Minister Freeland emphasized that extending this measure ensures “houses are used as homes for Canadian families to live in and do not become a speculative financial asset class,” signalling the government’s commitment to leveraging all available tools to make housing more accessible for Canadians. This ban works in conjunction with other measures, such as the existing tax on foreign buyers and broader Canada non-resident tax implications for foreign investors.
This includes specific estate tax in Canada, Ontario rules that also apply to non-residents holding property in that province.
What are the amendments to the prohibition?
Despite the foreign buyer ban in Canada, there are exceptions. If you’re in Canada on a work permit or as a student, certain pathways may allow you to buy property.
- Work permit holders must have at least 183 days left on their permit and cannot own more than one residential property.
- Internationally authorized students can buy one residential property in Canada, priced under $500,000, provided they’ve filed five years of income tax returns and been physically present in Canada for at least 244 days in each of those five years.
However, remember that even if you’re exempt from the federal ban, the Canadian non-resident tax at the provincial level may still apply.
What is the Foreign Buyer’s Tax?
When a foreign national purchases property in these areas, they pay the British Columbia foreign buyer tax on their share of the property’s value. While amendments permit certain temporary residents to acquire Canadian property, these individuals face substantial provincial surcharges in Ontario and British Columbia.
Specifically, the Non-Resident Speculation Tax (NRST) in Ontario levies a significant 25% on property purchases across the province. In British Columbia, a similar 20% land transfer tax in BC, Canada, is imposed on non-resident buyers in designated areas, with both taxes designed to mitigate the impact of foreign investment on local housing markets.
Ontario
For foreign nationals, as defined by the Immigration and Refugee Protection Act, which includes non-citizens and non-permanent residents, acquiring residential property in Ontario now incurs a substantial 25% NRST, effective October 25, 2022. This property tax in Ontario, Canada, which supplements the general Land Transfer Tax, is a direct consequence of Canada’s broader efforts to ban foreign buyers.
A critical detail is that even when a foreign national co-purchases with a Canadian citizen or permanent resident, the NRST is applied to the entire property value, not just their share, making all transferees responsible for this significant Canada non-resident tax. This regime is separate from any estate tax in Canada, as well as Ontario considerations that might arise for foreign-held properties.
NRST Rebate
Ontario offers a rebate on the foreign buyer’s tax in Canada if:
- The buyer becomes a permanent resident within four years of the purchase.
- Own the property individually or jointly with their spouse.
- You must also live in the home as your principal residence within 60 days of buying it, and maintain that residence status until you apply for the rebate.
For any conveyance occurring after March 29, 2022, the NRST Rebate for Permanent Residents of Canada stands as the exclusive available option.
Rebate Application Process
To claim the rebate, applications must be received by the ministry within 90 days of becoming a permanent resident of Canada. It’s crucial to note that the date your Permanent Resident Card is issued or received isn’t the one to use for this deadline. Instead, rely on official proof of permanent resident status, which includes:
- A Confirmation of Permanent Residence document (signed and dated by an immigration officer).
- A letter from IRCC (Immigration, Refugees and Citizenship Canada) confirming your permanent resident status is complete.
Exemptions Through Provincial Nominee Programs
An exemption from Ontario’s Non-Resident Speculation Tax (NRST) may be available for foreign nationals nominated under the Ontario Immigrant Nominee Program. To qualify, they must:
- Be an Ontario Immigrant Nominee Program nominee at purchase.
- Commit to applying for permanent residence (PR) before the nominee certificate expires.
- Co-owners (if any) must be Canadian citizens, permanent residents, other nominees, or protected persons.
- All owners must certify principal residence occupancy.
If you’re a confirmed nominee at the time of purchase, use the property as your primary residence, and purchase it as an individual, you can be exempt from the BC, Canada foreign buyer tax.
British Columbia
In British Columbia, a non-resident tax in Canada applies: if a residential property is located within a specified zone, a foreign national must pay an additional foreign buyer property tax. This is calculated based on the individual’s proportionate share of the property’s fair market value, representing their registered percentage of interest as recorded with the Land Title Office.
Should the property transfer occur within any of these regions, the Canadian taxation of non-residents rate is 20% on that proportionate share’s fair market value:
- Capital Regional District
- Fraser Valley Regional District
- Metro Vancouver Regional District
- Regional District of Central Okanagan
- Regional District of Nanaimo
This contrasts with the property tax in Ontario, Canada, which has its own unique framework.
Rebate
In British Columbia, you may qualify for a rebate on the foreign buyer tax if you:
- Become a permanent resident or Canadian citizen within one year of the property transfer registration.
- Use the home as your principal residence.
- Move-in within 92 days of registration.
- Continuously inhabit the home as your principal residence for at least one full year after moving in.
- Have not previously received a B.C. Provincial Nominee exemption.
Rebate Application Process
You can apply for a tax refund in Canada for non-residents between the first anniversary and the 18-month mark from the property’s Land Title Office registration date. Remember, you must become a permanent resident or Canadian citizen within one year of that registration.
Provincial Nominee Exemption
If you’re a foreign national confirmed under the B.C. Provincial Nominee Program, you can avoid the additional property transfer tax in British Columbia by claiming an exemption. This exemption requires:
- You to be a confirmed nominee at the time of registration,
- To use the property as your principal residence
- The transfer must be made to an individual.
Conclusion
Foreign property rules in Canada can be complex. Whether you’re planning to invest, live, or study here, understanding the various layers of Canada’s foreign buyer tax is essential. It can be a costly oversight if you don’t. And remember that Canada’s foreign buyer ban rules are subject to change.
If you’re unsure about your eligibility or obligations, consulting with our immigration lawyer in Canada could save you time, stress, and potentially a large sum of money. Ready to understand your options? Contact Chaudhary Law for trusted legal guidance today.
FAQs
What is the tax on foreigners buying property in Canada?
Foreign buyers may be subject to provincial taxes, such as Ontario’s NRST (25%) or BC’s 20% tax, as well as restrictions imposed by the federal buyer ban.
What is the foreign buyer rule in Canada?
The rule refers to taxes on foreign buyers and restrictions imposed on non-residents purchasing Canadian property, including the federal prohibition effective until 2027.
What are the new rules for foreigners buying property in Canada?
Amendments now allow some work permit holders and students to buy property, but only under strict conditions.
Do foreign buyer taxes affect house prices?
The impact of Canada’s foreign buyer taxes on house prices is a subject of ongoing debate. While some argue that they can cool speculative demand in targeted markets, others contend that broader economic factors, such as interest rates and housing supply, are far more influential.
Can foreigners buy property in Canada?
Generally, non-Canadians are prohibited from buying residential property due to a federal ban in effect until January 1, 2027. However, specific exemptions exist for certain groups, such as eligible international students and temporary workers, provided they meet strict qualifying criteria.
Tax on foreigners buying property in Canada?
Yes, several provinces impose significant tax on foreign buyers in addition to the federal ban. For example, Ontario levies a 25% Non-Resident Speculation Tax (NRST) province-wide, and British Columbia has a 20% Additional Property Transfer Tax in designated areas.
What are the rules for foreigners buying property in Canada?
The rules are layered: a federal ban on non-Canadians buying residential property remains in effect until 2027, but specific exemptions are in place. Additionally, provincial non-resident taxes apply, even if federally exempt, unless specific provincial exemptions are met.
Can I buy a house on a work permit in Canada?
Yes, certain work permit holders can now engage in Canada home sales by purchasing one residential property. To qualify, you must meet specific criteria, such as having at least 183 days remaining on your permit at the time of purchase and fulfilling prior tax filing and physical presence requirements.
Tax debate Ontario 2025 work permit holder?
Work permit holders in Ontario remain subject to the 25% NRST even if they are exempt from the federal ban. Eligibility for a rebate typically requires becoming a permanent resident within a specified timeframe after purchase and meeting occupancy conditions.
If I pay the NRST, do I still need to pay the land transfer tax?
Yes, absolutely. The NRST in Ontario is an additional tax imposed specifically on certain foreign purchasers. It is applied on top of and does not replace, the general Land Transfer Tax that all property buyers must pay.
What is the complete list of Ontario regions that include the non-resident speculation tax (NRST)?
As of October 25, 2022, the Non-Resident Speculation Tax (NRST) applies province-wide across all of Ontario. It is no longer limited to specific regions.
