Although the Province has just announced the 15% Non-Resident Speculation tax, there are already more questions than answers. Here is what you need to know.

  1. The tax is for non-residents of Canada buying 1-6 residential units in the Golden Horseshoe area of Ontario.

This tax is in addition to any Land Transfer Tax payable. It applies only on 1-6 units of residential property purchased by a Non-resident of Canada in the Golden Horseshoe Region of Ontario, including Toronto, Niagara, Hamilton, Peterborough, Simcoe, Waterloo and York. It thus does NOT apply to any apartment building with at least 7 residential units, or any commercial property, industrial property or vacant land.

  1. What if you are a Canadian citizen but also a non-resident?

If you are a Canadian citizen, you do not pay the tax. Even if you are a non-resident, living in the US, Great Britain or Hong Kong, as long as you are a Canadian citizen, you will not pay this tax.

  1. What if there are 3 buyers buying a property that cost $500,000.00, each owning a third of the property, with 2 owners being Canadian citizens and one being a non-resident?

Here it becomes very problematic. Even if the non-resident will own only one third of the property, they must pay 15% on the entire purchase price of $500,000.00, or $75,000.00

  1. Lenders ask for parents to sometimes co-sign a mortgage for their children buying a home and take a small percentage of title, even 1%, to do so. What happens if the children are permanent residents of Canada but the parent is a non-resident?

This is a disaster, because under the new rules, even if the parent was holding the 1% title in trust for the children, they must pay 15% of the tax on the ENTIRE purchase price.  Mortgage brokers, lenders and realtors must be aware of this when qualifying potential buyers. In this regard, lenders will have to start giving serious consideration to accepting a guarantee instead from the non-resident parents, to avoid the non-resident parents having to take any interest in the property, triggering this tax. The issue, however, is that if the children do not qualify based on their income, the parent may have to go on title to satisfy the lender requirements. In addition, the guarantee will likely require the parents to obtain independent legal advice , and permit them to raise more defences if the bank tries to enforce it. As you can see, this is not easy, and this must be determined before anyone in this situation puts in an offer to buy a home.

  1. Rebates

Even if the tax is paid, rebates will be available if the non-resident becomes a resident of Canada or a Canadian citizen within 4 years of closing, or if the non-resident is a foreign student who has been enrolled as a full-time student at an approved Ontario institution for at least 2 years after closing, or the foreign national has worked at a full-time Ontario job for at least one year after closing.

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