Canadian Taxes And Foreign Buyers Purchasing Toronto Real Estate
If you are not a citizen or permanent resident of Canada, your purchase of a residential property in Toronto will be subject to 15% Foreign Buyer's Tax called the Non-Resident Speculation Tax (NRST).
Exemptions To The NRST If you are a foreign national who is nominated under the Ontario Immigrant Nominee Program at the time of your property purchase and you have applied to become a permanent resident of Canada you could be exempt.
Also if you are a foreign national who purchases a residential property with a spouse who is a Canadian citizen or permanent resident of Canada you could be exempt. However, the subject property must be occupied as your principal residence.
Rebates Of NRST
You may be eligible for a rebate of the NRST under the following conditions:
If you are a Foreign National who becomes a permanent resident of Canada within 4 years of buying your Toronto property
If you are an International Student who has been enrolled full-time in an Ontario university or college for at least 2 years
If you are a Foreign National who has been working in Ontario full-time for at least 1 year
In order to qualify for the rebate you must be the sole property owner or own it exclusively with your spouse and it must be your principal residence.
Land Transfer Taxes All buyers, whether local or foreign, who purchase real estate in Toronto are required to pay two Land Transfer Taxes (LTT) - one to the province of Ontario and one to the City of Toronto. A purchase of a $1M home or condo in Toronto translates into approximately $32,950 owing in Land Transfer Tax. A simple way to determine the approximate amount of funds you will need to set aside for land transfer tax is to use this Land Transfer Tax Calculator.
If you are a first time home buyer you are eligible for certain rebates and tax credits. In order to be considered a first time homebuyer you cannot have owned property before in your lifetime anywhere in the world. First time buyers can get a rebate of up to $2,000 which is equivalent to the first $227,500 of a property's value for the Ontario Land Transfer Tax and a rebate of up to $3,725 which is equivalent to the first $400,000 of a property's value for Toronto's land transfer tax.
If you are purchasing a new house or condo from the builder or buying a house that has been extensively renovated, the Harmonized Sales Tax (HST) of 13% will apply. Buyers of new homes and condos can apply for federal and provincial government rebates to offset portions of the HST. The HST does not apply on the purchase price of resale homes and condos. Also a buyer does not pay Land Transfer Tax on the HST portion of the purchase price.
Be aware that there are tax implications for foreign owners when they sell property in Toronto. A foreign seller may be subject to a non-resident withholding tax of 25% on the sale price of the property. Further details can be found on the Canada Revenue Agency website. One should consult with their own accountant to fully understand the Canadian tax rules and implications of selling a property in Toronto as a foreign owner.
Once you are an owner of property in Toronto you will have to pay yearly property taxes to the City of Toronto. The annual property tax is calculated by multiplying the tax rate and the current value of the property. The City of Toronto mails out tax bills twice a year.