Canadian Foreign and Local Housing Taxes You Can't Afford to Ignore
If you are a foreign investor or homeowner you’ll want to be
acutely aware that Canada has many housing taxes that have been introduced throughout the recent years. While most provinces will have similar approaches, **below is how Ontario and British Columbia** set the various taxes that apply when you just buy a home and on a yearly basis for both locals and foreigners.
ONTARIO
Land Transfer Tax (LTT)
When you buy a house, condo or land in Ontario you are subject to land transfer tax which is due upon closing. If you buy in the city of Toronto, you are taxed an additional upfront tax on top of the Ontario one. See below for a breakdown of how a PTT calculator will calculate it.
LTT Rebate
Beginning January 1, 2017, no land transfer tax would be payable by qualifying first‑time purchasers on the first $368,000 of the value of the consideration for eligible homes. First‑time purchasers of homes greater than $368,000 would receive a maximum refund of $4,000.
Property Taxes
Property tax is a tax based on the assessed value of a property. If you own a property, you will have to pay property tax. It is used to pay for city services such as police, the fire department, and public transit as well as elementary and secondary education.
It is calculated by multiplying the home value by the residential property tax rate which differs per municipality - use this calculator to find out how much you may owe.
Non-Resident Speculation Tax (NRST)
The Non-Resident Speculation Tax is a 15% Tax for foreign buyers or those without citizenship. With the average price of a detached home in Toronto in the $1,500,000 range, foreign buyers may be required to pay over $200,000 in NRST if they buy after April 21, 2017. However, buyers who signed a binding purchase agreement before April 20, 2017 will NOT be required to pay the NRST. See here for a more detailed article on it.
Capital Gains Tax
Selling an investment property: Only 50% of the capital gain from any sale will be taxed based on the marginal tax rate which differs between each province. Use this calculator to see how this applies to you.
Exemption if it’s your principal residence: When you sell your home, you may realize a capital gain. If the property was solely your principal residence for every year you owned it, you do not have to pay tax on the gain. If at any time during the period you owned the property, it was not your principal residence, or solely your principal residence, you might not be able to benefit from the principal residence exemption on all or part of the capital gain that you have to report.
HST Tax & Rebate
Any pre-sale and new construction home is subject to HST. As per this article, in the summer of 2010, new home buyers in Ontario were charged 13% HST on their purchase, which consists of a 5% federal tax and 8% provincial tax. The new house HST rebate in Ontario rebates 75% of the Ontario portion of the HST, up to a new home purchase amount of $400,000. This results in a maximum rebate at a provincial level of $24,000 ($400,000 x 0.08 x 0.75). This is called the Ontario New Residential Rental Property Rebate (NRRPR).
It is also possible to obtain a federal rebate of up to $6,000. In other provinces, the new home rebate is clawed-back for any house purchase over $450,000. This is not the case in Ontario, however, where the provincial rebate is never clawed back it simply only applies to the first $400,000 meaning the largest rebate possible even for a million dollar home is $24,000 provincially. The maximum rebate possible federally is an additional $6,000.
How Long Does It Take To Receive The HST Rebate?
NRRP rebates and new housing HST rebates are typically received from the Canada Revenue Agency (CRA) within two months. Rebates can be as fast as four weeks, but can occasionally take up to six months to process
BRITISH COLUMBIA
Property (Land) Transfer Tax
When you buy a house, condo or land in BC you are subject to property transfer tax which is due upon closing. Unlike the city of Toronto, you are NOT taxed an additional upfront municipal tax on top of the BC one. See below for a breakdown of how a PTT calculator will calculate it.
Additional Property Transfer Tax for Foreign Entities & Taxable Trustees
In addition to the property transfer tax, if you're a foreign national, foreign corporation or taxable trustee, you must pay the additional property transfer tax on your proportionate share of a residential property's fair market value if the property is within specified areas of B.C. Your proportionate share is the percentage of interest that you're registering on title with the Land Title Office. For example, if you're a foreign entity (foreign national or foreign corporation) acquiring a 60% interest in a property, you pay the additional property transfer tax on 60% of the residential property's fair market value.
Tax Amount and Specified B.C. Areas
If the property transfer is within the following areas, the tax rate is 20% on the fair market value of your proportionate share:
Capital Regional District
Fraser Valley Regional District
Metro Vancouver Regional District
Regional District of Central Okanagan
Regional District of Nanaimo
Property Taxes
When you own, lease or gain an interest in a property (e.g. land, home, etc.) located in B.C. you must pay property taxes.
Property tax is a tax based on the assessed value of a property. If you own a property, you will have to pay property tax.
It is calculated by multiplying the home value by the residential property tax rate which differs per municipality - use this calculator to find out how much you may owe in BC.
Foreign Buyers Tax aka The Additional Property Transfer Tax (ATT)
It was introduced by the BC government in 2016 and is 20% of the fair market value of the property, payable when a foreign individual (an individual who is not a permanent resident or a citizen of Canada) buys property in certain specified areas in BC, including Greater Victoria, Greater Vancouver, Nanaimo and Kelowna. There are two exceptions to paying ATT for recent immigrants to BC which can be learned about in this article.
Speculation and Vacancy Tax
The speculation and vacancy tax rate varies depending on the owner’s tax residency. In addition, the tax rate varies based on whether the owner is a Canadian citizen or permanent resident of Canada, or a satellite family.
For 2018, the tax rate is: 0.5% of the property’s assessed value for all properties subject to the tax For 2019 and subsequent years, the tax rate is: 2% for foreign owners and satellite families 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family. The speculation and vacancy tax applies based on ownership as of December 31 each year. This tax is different from the below tax which applies to those who own property in Vancouver.
Empty Homes Tax
Properties deemed empty will be subject to a tax of 1.25% of the property’s 2020 assessed taxable value - this will happen on top of BC’s Speculation and Vacancy Tax. Most homes will not be subject to the tax, as it does not apply to principal residences or homes rented for at least six months of the year.
Capital Gains Tax
Only 50% of the capital gain from any sale will be taxed based on the marginal tax rate which differs between each province. See how to calculate it here. If it’s a principal residence, you are excluded from this tax.
GST New Homes Tax
The GST on new or pre sale homes in BC is a 5% Federal Tax, that is paid at the time of purchase. If your new home is priced below $450,000 before tax, there is an eligible partial rebate of the 5% GST paid on the purchase of a new or pre-sale home. If you are a first-time buyer, this increases to $750,000. Additionally, see here for all special first-time home buyer programs available to help subsidize many of the above taxes.
THE BOTTOM LINE
Foreign investors, Expats, and new home buyers need to be especially aware of these taxes since overlooking even just one could put you in a serious financial crunch. Some of these taxes are yearly while some are one-time events so just make sure you know where you stand and have budgeted adequately.
See what you qualify for and contact Paul to get your pre-approval.
Paul Davidescu (www.levelupmortgages.com)
Level Up Mortgages
604-809-3188
paul(at)levelupmortgages.com
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