Foreign Buyers and Sellers and Tax Implications in Ontario

Moving to a new country can be quite stressful. Whether you have made the plunge for work or leisure, here is what you need to know prior to purchasing real estate here in Ontario, Canada. 


Ontario, Canada has become one of the hottest destinations around the world.  In recent years, Canada has been voted the number one place to live in the world, and with that comes an increase in immigration cases.   Most of this immigration happens to be in Ontario. This had a major impact on the real estate economy by increasing the demand and lessening the supply. As a result of this surge, the Government of Ontario introduced the Non-Resident Speculation Tax in 2018 (“NRST”).   Since its introduction, several changes have been made, namely the amount of tax imposed on the purchase of property in Ontario to a foreign buyer is now 25%.  The Government has confirmed that the tax rate (15%, 20% or 25%) is dependant on when the Agreement of Purchase and Sale was entered, not when the title is transferred. To assist in outlining what your rate will be, contact our office and provide the Agreement of Purchase and Sale. 


The NRST tax will be added to the purchase price at the time of closing and will be paid to the Government together with your Land Transfer tax payment. Both these sums are paid by your purchasing real estate lawyer and will therefore be collected from you as part of your closing costs. 


If you are foreign seller who has previously purchased property in Ontario, you are also going to get hit with capital gains tax upon your sale.  This tax is calculated by the Canada Revenue Agency (“CRA’), upon receipt of your selling real estate lawyer’s completed T2062 application for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property.    Your lawyer is required to holdback 25% of the sale price in their trust account, until receipt of the Certificate of Compliance from the CRA, where the amount required to pay in tax is calculated. Your lawyer will then deliver the required amount to the CRA and release the balance of the holdback to your account. Please note that this process is quite timely as the CRA has a large backlog of files and it can take several months. Not to worry, as your money is safe in your lawyer’s trust account. 


All in all, choosing to buy property to Ontario can be a great decision, but in doing that, keep in mind the above factors and speak to a specialist before taking the leap. 


Natalie Hamzeh, LL.B. LL.M.

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