Overview by Ontario.ca
The 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. Effective October 25, 2022, the NRST rate is 25%.
The NRST is applied to the value of the consideration for a conveyance. See the Land Transfer Tax page for information about the value of the consideration. For information on calculating the value of the consideration on the purchase of a newly constructed home, please see Determining the Value of the Consideration for Transfers of New Homes.
The NRST applies in addition to the general Land Transfer Tax (LTT) in Ontario. It does not apply on top of the LTT.
Entities subject to NRST
The NRST applies to foreign entities or taxable trustees who purchase or acquire residential property in Ontario. The persons purchasing or acquiring land are referred to as transferees.A foreign entity is either a foreign national or a foreign corporation.
A foreign national, as defined in the Immigration and Refugee Protection Act (Canada), is an individual who is not a Canadian citizen or permanent resident of Canada.
A permanent resident means a person who has acquired permanent resident status under section 46 of the Immigration and Refugee Protection Act (Canada) and has not subsequently lost that status. The phrase permanent resident of Canada does NOT refer to whether or not you reside in Canada.If you have applied to become a permanent resident of Canada, but you have not obtained that status at the time your home transaction closes, you must pay NRST unless you are eligible for an exemption. If you become a permanent resident of Canada after the home transaction closes, you may qualify for a rebate of the NRST if you meet specific requirements. Please see our Non-Resident Speculation Tax rebates and refunds page.
Types of property subject to NRST
The NRST applies to the transfer of "designated land", which is land that contains at least one and not more than six single family residences. Examples of land containing one single family residence include a detached house, a semi-detached house, a townhouse, and a residential condominium unit. Examples of designated land containing more than one single family residence include duplexes, triplexes, fourplexes, fiveplexes and sixplexes. For the purposes of the NRST, single family residences include cottages, cabins and other similar structures that are designed for occupation as the residence of a family, whether or not that family has a residence elsewhere and whether or not the structure is habitable for only part of the year. The zoning designation of the land is irrelevant for establishing whether a structure is a single family residence. Single family residences do not include a residence on agricultural land that is eligible to be classified in the farm property class prescribed under the Assessment Act. As of March 27, 2024, parking units and storage units in a condominium complex are also designated land, meaning that standalone purchases of these units are also subject to NRST.The NRST does not apply to other types of land such as land containing multi-residential rental apartment buildings with more than six units, agricultural land, commercial land or industrial land.The NRST applies on the value of the consideration for the residential property. If the land transferred includes residential property and land used for non-residential purposes, the NRST applies on the portion of the value of the consideration attributable to the residential property. Take for example a transaction where the value of the consideration is $3,000,000 and the land contains:
- one single family residence with a value of the consideration of $1,400,000
- land used for commercial purposes with a value of the consideration of $1,600,000
In the above example, the NRST would apply to only the $1,400,000 portion
Who pays NRST
The NRST applies to the value of the consideration for the transfer of residential property if any one of the transferees is a foreign entity or taxable trustee. For example, if a transfer of residential property is made to three transferees, one of whom is a foreign entity that acquires a 33% share in the land, the NRST would apply to 100% of the value of the consideration for the transfer.
As an example, Tomoko, Shoshana, and Lieven buy a home together. Tomoko acquires 33%, Shoshana acquires 33% and Lieven acquires 34% interest, with a value of the consideration of $1,500,000. Tomoko and Shoshana are Canadian citizens, but Lieven is a foreign national. The NRST is applied to the full value of the consideration, resulting in NRST payable of $375,000. They do not pay NRST on just 34% of the value of the consideration. The NRST is not prorated to the interest acquired by the foreign national.
Each transferee is liable for any NRST payable. If a foreign entity or taxable trustee does not pay the NRST, the other transferees will be required to pay the tax. This applies even if the other transferees are Canadian citizens, permanent residents of Canada or non-foreign corporatios.
Rebate and refund of the NRST
A rebate of the NRST, may be available for registered transfers if the transferee becomes a permanent resident of Canada. If the land purchased is within the Greater Golden Horseshoe Region of Ontario, and if a binding agreement of purchase and sale was signed on or before March 29, 2022, and not assigned to other persons after March 29, 2022, then a foreign national may qualify for the International Student NRST Rebate or the Foreign National Working in Ontario NRST Rebate.
A refund of the NRST may be available for eligible transferees if the tax has been improperly paid or overpaid.
Supporting documentation will be required to substantiate all applications for a rebate or refund.
To learn more, refer to our NRST rebates and refunds webpage
Tax avoidance and offences
All transfers of land in Ontario are subject to audit.
Anti-avoidance provisions will be enforced to ensure the NRST is reported and paid as required. This includes examining circumstances where Canadian citizens or permanent residents of Canada, as taxable trustees, hold property in trust for a foreign entity. This also includes preventing the use of multiple conveyances to avoid the NRST.
Failure to pay the NRST as required may result in a penalty, fine and/or imprisonment. For more details contact 416-882-9090