Ontario’s Fair Housing Plan – Non-resident Speculation Tax

At Kutner Law we try to keep you informed with changes in Ontario laws. One of the most newsworthy changes of the last few months was the introduction of a 15% Non-Resident Speculation Tax. According to early news reports the GTA real estate market has already begun to soften, however, it may still be some time until we see whether there has been any true impact. Below we have provided a summary of the new tax.

On April 20th, 2017, the Provincial government of Ontario announced the implementation of 16 new measures as part of “Ontario’s fair housing plan”. Included as one of the measures was a 15% Non-Resident Speculation Tax (NRST) on the purchase or acquisition of residential properties within the Greater Golden Horseshoe (GGH). The NRST became effective the following day on April 21st, 2017 but did not apply to any binding purchases or sale agreements made prior to, or on the date of April 20, 2017.

The Greater Golden Horseshoe encompasses the following geographic areas:

Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington and York.

The NRST is applicable to the transfer of land which contains at least one and not more than six single family residences. It does not apply to transfers of other forms of land such as commercial, agricultural, industrial or multi residential property exceeding 6 units. It is applicable to individuals who are not permanent residents or citizens of Canada, as well as foreign corporations and taxable trustees that purchase residential property within the GGH. A taxable trustee is any entity, whether foreign or Canadian, that holds title in trust for foreign entity beneficiaries.

There are, however, exemptions from the tax. These include purchasers that are a mutual fund trust, real estate investment trust, or specified investment flow-through trust. The NRST will apply in conjunction with the general land transfer tax in Ontario.

As mentioned above the long term implications of the new tax are not known. One of the underlying reasons for the implementation of the tax is that residential property prices in the GGH have risen quickly over the last few years, making double digit gains in the past two consecutive years. According to the Liberal government the NRST is a crucial component of Ontario’s objective of creating more affordable housing.

Some of the other applications of the provincial government’s housing plan include rebating a fraction of development charges to encourage rental construction, as well as reviewing rules for real estate agents in particular circumstances such as double ending, where both the buyer and seller are represented by the same agent.

If you want to discuss whether a particular transaction will apply to you under the Act please get in touch with either Howard or Michael.

The above is for informational purposes and should not be relied on as legal advice.