Some Q&A on the new 15 % foreign national speculation tax.

Thursday Jun 15th, 2017


15% tax Canada

The tax is for Foreign Nationals in Canada buying 1-6 residential units in the Golden Horseshoe of Ontario. This tax is in addition to any land transfer tax payable. It applies only to 1-6 units of residential property purchased by a foreign national in the Golden Horseshoe of Ontario, including Toronto, Niagara, Hamilton, Peterborough, Simcoe, Waterloo, and York, as well as counties of Brant, Dufferin, Durham, Haldimand, Halton, Kawartha Lakes, Northumberland, Peel and Wellington. It doesn’t apply to any apartment building with at least 7 residential units, or any commercial, industrial property or vacant land.


Below are frequently asked questions and the associated answers:


Q: What if you are a Canadian citizen but also a non-resident?


A: If you are a Canadian citizen, you don’t pay the tax. Even if you are living in US, Hong Kong, Tel Aviv or Paris, as long as you are a Canadian citizen, you don’t pay this tax.


Q: What if there are three buyers buying a property that cost $500,000, each buyer owning a third of the property, with two owners being Canadian citizens and the one being a foreign national?


A: Even if the foreign national will only own one-third of the property, the buyers must pay 15% tax on the entire purchase price of $500,000, or $75,000.


Q: Landers ask for parents to co-sign a mortgage for their children buying a home and take a small percentage of title, let’s say 1%. What happens if the children are citizens or permanent residents of Canada, but the parent is a foreign national?


A: Under the new rules, even if the parent was holding the 1%title in trust for the children, they must pay15% tax on the entire purchase price. Lenders must be aware of this rule when qualifying a potential buyer. In this regard, lenders will have to start giving serious consideration to accepting a guarantee instead, to avoid the parents having to take any interest in the property, triggering this tax. The issue, however, is that if the children do not qualify for the mortgage based on their income, the parents may have to go on the title to satisfy the lender requirements.


Q: Is a Canadian citizen, who is holding the property in trust for the foreign national, required to pay the 15% tax?


A: Yes.


Q: Who is eligible for the refund of tax paid?


A: Even if the tax is paid, refunds are available upon application, if the foreign national becomes a permanent resident of Canada or Canadian citizen within 4 years of closing, or if the buyer is a foreign student who has been enrolled as a full-time student in approved Ontario institution for at least 2 years after closing, or the foreign national has legally worked in a full-time position for at least 2 years after closing and occupied the property or a principal residence. As matter of fact, students who graduate with a student visa typically have the ability to obtain a 3-year open work permit.

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