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04.03.2022 | Buying

What you need to know about the changes to the Ontario Foreign Buyers Tax Program

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The Ontario Government has announced changes to the Non-resident homebuyers tax.  Changes include an increase of the tax to non-resident homebuyers to 20%, a reduced eligibility for the rebate program, and expanded coverage province wide.  Previously, this tax was 15% and was centered around the Golden Horseshoe. This move brings Ontario’s policies closer to those of British Columbia, which has had a higher foreign-buyers tax for years.

Why the change?

The Government feels that these changes are in align with the action plan on housing, as they are working to increase the supply of housing and prioritizing housing for local families and homebuyers in the province.  The Government feels this change will deter foreign speculators who are looking to invest in Ontario housing to make a quick profit.  A task force that studied housing affordability in Ontario found that home prices have tripled over the past decade, outpacing income growth. They also found that the province is 1.2 million homes short of the G7 average, leading to issues with worker recruitment and retention due to lack of housing.

When do the changes take effect?

These changes take effect for all binding agreements of purchase and sale entered into on or after March 30, 2022. 

What about the rebates?

The Government has also changed the rebate program effective immediately, that some foreign nationals were previously eligible for.  For example, foreign students who were enrolled in full-time studies for at least two years after their home purchase were previously eligible for a rebate. As were foreign nationals who worked full-time for one year after their purchase.  Those homebuyers are no longer eligible under the new program, unless they become permanent residents of Canada.

How does this apply to new permanent residents of Canada?

The Ontario government has said that rebates and other exemptions will still be available for those who become permanent residents of Canada and commit to laying down roots in the province long-term.  Rebates remain available for foreign nationals who become permanent residents of Canada within four years after the tax became payable. Those who become permanent residents of Canada within 4 years from the date of closing, may apply for the rebate within 90 days from the date of becoming a permanent resident. Exemptions also remain available for nominees under the Ontario Immigrant Nominee Program, protected persons (refugees), and spouses of individuals not subject to the Non-resident speculation tax, if eligibility criteria are met.  For more information on eligibility and transitional rules, refer to the Government published announcement:

https://www.fin.gov.on.ca/en/bulletins/nrst/

What will be the impact of this change?

According to the most recent data from the Canadian Housing Statistics Program, foreign owners of real estate accounted for 2.2% of all residential property in Ontario in 2020.  The highest foreign homeownership rate was in the city of Toronto, where non-residents owned 3.8% of all homes and 7% of condos.  While these changes will have some impact, it uncertain how significant this change will be in terms of housing affordability in Ontario.

Work with a professional

Because this tax can represent a large sum of money, knowing upfront whether you qualify for an exemption or may qualify for a rebate in the future can significantly impact your choice of when and where to buy.

Having a real estate professional on your side who is familiar with the guidelines around The Foreign Buyers Tax can help ensure you don’t pay an unnecessarily costs or face interest charges and penalties.

Read more about the Foreign Buyers Tax program prior to these changes here.