Non-Residential Speculation Tax Highlights
Niagara Included in the New Non-Residential Speculation Tax: The tidal wave of Buyers spilling into Niagara, especially from the GTA, has intensified in 2017. As part of the Greater Golden Horseshoe, Niagara is included into the area in which the new Non-Resident Speculation Tax (NRST) applies.
In short, the Non-Residential Speculation Tax is comprised of the following main points:
- A 15% tax applies as of April 21, 2017
- On the purchase or acquisition of an interest in residential property,
- Located in the Greater Golden Horseshoe (GGH)
- By individuals who are not citizens or permanent residents of Canada, or
- By foreign corporations (“foreign entities”) and taxable trustees.
This 15% Non-Residential Speculation Tax is in addition to Ontario Land Transfer Tax.
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Real Property Affected by the Non-Residential Speculation Tax
Properties affected by the tax include land transfers that contain one and not more than six single family residences. These include detached, semi-detached houses, townhouses and condominiums, duplexes, triplexes, fourplexes, fiveplexes and sixplexes.
Properties NOT Effected by the Non-Residential Speculation Tax
The tax does not apply to multi-residential apartments with more than six units, agricultural, commercial or industrial land.
How it Applies to Mixed-Use Properties
If a real property has two uses, say a residential and a commercial component, the part of the price apportioned to the residential portion is taxable. For example, on a purchase price of $550,000, the residential segment is valued at $250,000 and the commercial at $300,000. The NRST Tax is payable only on the residential portion of $250,000.
Additional Application of the Tax
In a residential purchase if one or more of the buyers are a foreign entity or a taxable trustee, the tax is payable. Let’s say a residential property purchase involves three buyers; one is a foreign entity and two are Canadian Citizens or permanent residents. Under this circumstance the 15% tax is payable on 100% of the purchase price.
The purchase is exempt from the tax if a Canadian citizen or permanent resident buys a home with a spouse who is a foreign national. Yet if the husband and wife purchase with a third party who is foreign national the tax would apply.
When Can the Tax be Rebated?
- The foreign national becomes a Canadian citizen after four years of purchase;
- A student enrolled full time for two years from date of purchase;
- The foreign national has worked full time for a continuous period of one year from date of purchase.