Friday, April 21, 2017

Foreign Tax Definition and Rules that apply after April 21st,2017

Non-Resident Speculation Tax

The implementation of the Non-Resident Speculation Tax is subject to the approval of the Legislature.

Overview

The non-resident speculation tax (NRST) is a 15 per cent tax on the purchase or acquisition of an interest in residential property located in the Greater Golden Horseshoe (GGH) by individuals who are not citizens or permanent residents of Canada or by foreign corporations (“foreign entities”) and taxable trustees.
The NRST applies in addition to the general land transfer tax in Ontario.
The GGH includes the following geographic areas: Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington and York.  Refer to the map at the end of the document.

Effective Date

Upon the enactment of legislation, the NRST will be effective as of April 21, 2017.  
Binding agreements of purchase and sale signed on or before April 20, 2017 are not subject to the NRST.

Entities Subject to the NRST

The NRST applies to foreign entities or taxable trustees who purchase or acquire residential property in the GGH.
foreign entity is either a foreign national or a foreign corporation.
foreign national, as defined in the Immigration and Refugee Protection Act (Canada), is an individual who is not a Canadian citizen or permanent resident of Canada.
foreign corporation is a corporation that is one of the following:
  • Is not incorporated in Canada;
  • Is incorporated in Canada but is controlled in whole or in part by a foreign national or other foreign corporation, unless the shares of the corporation are listed on a Canadian stock exchange; or
  • Is controlled directly or indirectly by a foreign entity for the purposes of section 256 of the Income Tax Act (Canada).
For the purposes of the NRST, a taxable trustee is a trustee that is one of the following:
  • A foreign entity holding title in trust for beneficiaries, or
  • A Canadian citizen, permanent resident of Canada, or a corporation holding title in trust for foreign entity beneficiaries.

Types of Property Subject to the NRST

The NRST applies to the transfer of land which contains at least one and not more than six single family residences.  Examples of land containing one single family residence include detached and semi-detached houses, townhouses and condominium units.  In a situation involving the purchase of multiple condominium units, each unit would be considered land containing one single family residence.  Examples of land containing more than one single family residence that are subject to the tax include duplexes, triplexes, fourplexes, fiveplexes and sixplexes. 
The NRST does not apply to other types of land such as multi-residential rental apartment buildings with more than six units, agricultural land, commercial land or industrial land.
The NRST applies on the value of the consideration for the residential property. If the land transferred includes both residential property and another type of property, the NRST applies on the portion of the value of the consideration attributable to the residential property. For example, if the purchase price of the transaction is $1,000,000 and contains one single family residence with a value of the consideration of $400,000, and commercial land with a value of the consideration of $600,000, the 15 per cent NRST would only apply to the $400,000 portion.

General Application

The 15 per cent NRST applies to the value of the consideration for a transfer of residential property if any one of the transferees is a foreign entity or taxable trustee.
For example, if a transfer of residential property is made to four transferees, one of whom is a foreign entity that acquires a 25 per cent share in the land, the NRST would apply to 100 per cent of the value of the consideration for the transfer.
Each transferee is jointly and severally liable for any NRST payable. If a foreign entity or taxable trustee does not pay the NRST, the other transferees will be required to pay the tax. This applies even if the other transferees are Canadian citizens or permanent residents of Canada.
The NRST does not apply when a person purchases or acquires residential property as a trustee of a mutual fund trust, real estate investment trust or specified investment flow-through trust.
The NRST applies to unregistered dispositions of a beneficial interest in residential property. This includes purchases and acquisitions of residential property where section 3 of the Land Transfer Tax Act is applicable.

Exemptions

An exemption to the NRST is available to a foreign national who receives confirmation under the Ontario Immigrant Nominee Program (“nominee”). To qualify for this exemption, the foreign national must be confirmed under the Ontario Immigrant Nominee Program at the time of the purchase or acquisition and the property must be used as the foreign national’s principal residence.
An exemption is also available to a foreign national who is conferred the status of “convention refugee” or “person in need of protection” (“refugee”) under the Immigration and Refugee Protection Act at the time of the purchase or acquisition.
A foreign national who has a spouse (as defined in the Land Transfer Tax Act), who is a Canadian citizen, permanent resident of Canada, “nominee” or “refugee” is exempt from the NRST if the foreign national jointly purchases residential property with that spouse.   
However, the exemption does not apply if the Canadian citizen, permanent resident of Canada, “nominee”, or “refugee” and his or her foreign national spouse purchased the property with another foreign national.  For example, if three parties purchase a property as follows:
  • one Canadian citizen and his or her foreign national spouse; and
  • a third party who is a foreign national,
 the exemption would not apply and NRST would be payable. 

Rebates

A rebate of the NRST may be available in the following situations:
  • The foreign national becomes a Canadian citizen or permanent resident of Canada within four years of the date of the purchase or acquisition;
  • The foreign national is a student who has been enrolled full-time for at least two years from the date of purchase or acquisition in an “approved institution”, as outlined in Ontario Regulation 70/17 of the Ministry of Training, Colleges, and Universities Act; or
  • The foreign national has legally worked full-time in Ontario for a continuous period of one year since the date of purchase or acquisition.
In order to be eligible for the rebates, the foreign national must exclusively hold the property, or hold the property exclusively with his or her spouse.  The property must also have been used as  the foreign national’s (and if applicable their spouse’s) principal residence for the duration of the period.
The rebate will be paid with interest, calculated at the prescribed refund rate under the Land Transfer Tax Act. 
Supporting documentation will be required to substantiate all applications for rebates.

Tax Avoidance and Offences

All transfers of land in Ontario are subject to audit.
Anti-avoidance provisions will be enforced to ensure the NRST is reported and paid as required. This includes examining circumstances where Canadian citizens or permanent residents of Canada, as taxable trustees, hold property in trust for a foreign entity or are trustees where a beneficiary may be a foreign entity.  This also includes preventing the use of multiple conveyances to avoid the NRST.
Failure to pay the NRST as required may result in a penalty, fine and/or imprisonment.

Payment of the NRST

NOTE:  All transfers registered on or after April 21, 2017 must contain a statement expressly acknowledging that consideration has been given to the application of the NRST.  Registrants are required to provide one of the following two statements:
The Non-Resident Speculation Tax does not apply to this transfer
The Non-Resident Speculation Tax applies to this transfer and has been paid to the Ministry of Finance, as confirmed by Receipt # *******
For paper registrations, the applicable statement is to be inserted in paragraph 5 of the Land Transfer Tax Affidavit.  For registrations processed through Teraview, the applicable statement is to be inserted in Land Transfer Tax statement 9151 (Other remarks and explanations), which is found under the Explanations Tab.
Taxpayers reporting unregistered dispositions of land to the Ministry of Finance (MoF) must also expressly acknowledge in a covering letter that consideration has been given to the application of the NRST and whether or not it is payable on the reported transaction.

Electronic registrations

For an interim period, Ontario’s electronic registration system (operated by Teranet) will not be able to collect the NRST. During this interim period, to ensure compliance with the legislation, affected purchasers/transferees should pre-pay both the Land Transfer Tax and the NRST directly to the MoF’s office in Oshawa.  Once the MoF accepts the pre-payment of the taxes, the transfer may be registered electronically without further payment of Land Transfer Tax or NRST.
The Ministry will provide a letter confirming receipt of NRST with a receipt number.

Registrations made at Land Registry Offices

NRST payable on registrations that must be made at a Land Registry Office must be pre-paid directly to the MoF.  If the transfer is subject to NRST, both the Land Transfer Tax and NRST should be pre-paid directly to the MoF.
The transfer will be stamped with a direction to the Land Registrar that no further Land Transfer Tax is payable at registration and the MoF will also provide a letter confirming receipt of NRST.

Dispositions / Unregistered transfers

If a transfer will not be registered on title, a Return on the Acquisition of a Beneficial Interest in Land form, along with the payment of the Land Transfer Tax and the NRST must be submitted to the MoF within 30 days of the transfer of land.  For more information, see Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land

How to pre-pay the Land Transfer Tax and the NRST to the MoF

The following documentation must be submitted to the MoF:
For transfers to be registered and unregistered transfers / dispositions:
  1. Cheque for the Land Transfer Tax and the NRST (certified, if not drawn on the solicitor's trust account), made payable to the “Minister of Finance”
  2. Copy of the Agreement of Purchase and Sale, with all schedules attached
  3. Copy of the draft Statement of Adjustments (if applicable)
  4. If the value of the consideration is based on the fair market value of the land, any appraisals or documentation that is evidence of the fair market value of the land
  5. Any additional documents as may be required to determine the value of the consideration
In addition, for transfers to be registered:
  1. Authorizing or Cancelling a Representative form(s), completed by each transferee
  2. Copy of the Document “in preparation” or three copies of the Transfer/Deed if registration is done on paper
  3. If registration is done on paper, two completed Land Transfer Tax Affidavits.


 
 

Thursday, April 20, 2017

Ontario's Fair Housing Plan Announced Today!

Ontario's Fair Housing Plan


Ontario's Fair Housing Plan introduces a comprehensive package of measures to help more people find affordable homes, increase supply, protect buyers and renters and bring stability to the real estate market. The plan includes:

Actions to Address Demand for Housing:
  1. Introducing legislation that would, if passed, implement a new 15-per-cent Non-Resident Speculation Tax (NRST) on the price of homes in the Greater Golden Horseshoe (GGH) purchased by individuals who are not citizens or permanent residents of Canada or by foreign corporations. Ontario's economy benefits enormously from newcomers who decide to make the province home. The NRST would help to address unsustainable demand in this region and make housing more available and affordable, while ensuring Ontario continues to be a place that welcomes all new residents. The proposed tax would apply to transfers of land that contain at least one and not more than six single family residences. "Single family residences" include, for example, detached and semi-detached homes, townhomes and condominiums. The NRST would not apply to transfers of other types of land including multi-residential rental apartment buildings, agricultural land or commercial/industrial land. The NRST would be effective as of April 21, 2017, upon the enactment of the amending legislation.
    Refugees and nominees under the Ontario Immigrant Nominee Program would not be subject to the NRST. Subject to eligibility requirements, a rebate would be available for those who subsequently attain citizenship or permanent resident status as a well as foreign nationals working in Ontario and international students. See technical bulletin for further information.
Actions to Protect Renters
  1. Expanding rent control to all private rental units in Ontario, including those built after 1991. This will ensure increases in rental costs can only rise at the rate posted in the annual provincial rent increase guideline. Over the past ten years, the annual rent increase guideline has averaged two per cent. The increase is capped at a maximum of 2.5 per cent. Under these changes, landlords would still be able to apply vacancy decontrol and seek above guideline increases where permitted. Legislation will be introduced that, if passed, will enact this change effective April 20.‎
  2. The government will introduce legislation that would, if passed, strengthen the Residential Tenancies Act to further protect tenants and ensure predictability for landlords. This will include developing a standard lease with explanatory information available in multiple languages, tightening provisions for "landlord's own use" evictions, and ensuring that tenants are adequately compensated if asked to vacate under this rule; prohibiting above-guideline increases where elevator work orders have not been completed; and making technical changes at the Landlord-Tenant Board to make the process fairer and easier for renters and landlords. These changes would apply to the entire province.
Actions to Increase Housing Supply
  1. Establishing a program to leverage the value of surplus provincial land assets across the province to develop a mix of market housing and new, permanent, sustainable and affordable housing supply. Potential sites under consideration for a pilot project include the West Don Lands, 27 Grosvenor/26 Grenville Streets in Toronto, and other sites in the province. This builds on an agreement reached previously with the City of Toronto to ensure a minimum of 20 per cent of residential units within the West Don Lands are available for affordable rental, with an additional 5 per cent of units for affordable ownership.
  2. Introducing legislation that would, if passed, empower the City of Toronto, and potentially other interested municipalities, to introduce a vacant homes property tax to encourage property owners to sell unoccupied units or rent them out, to address concerns about residential units potentially being left vacant by speculators.
  3. Ensuring that property tax for new multi-residential apartment buildings is charged at a similar rate as other residential properties. This will encourage developers to build more new purpose-built rental housing and will apply to the entire province.
  4. Introducing a targeted $125-million, five-year program to further encourage the construction of new rental apartment buildings by rebating a portion of development charges. Working with municipalities, the government would target projects in those communities that are most in need of new purpose-built rental housing.
  5. Providing municipalities with the flexibility to use property tax tools to help unlock development opportunities. For example, municipalities could be permitted to impose a higher tax on vacant land that has been approved for new housing.
  6. Creating a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions. As well, a multi-ministry working group will be established to work with the development industry and municipalities to identify opportunities to streamline the development approvals process.
Other Actions to Protect Homebuyers and Increase Information Sharing
  1. The province will work to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market such as "paper flipping," a practice that includes entering into a contractual agreement to buy a residential unit and assigning it to another person prior to closing.
  2. Working with the real estate profession and consumers, the province is committing to review the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions. This includes practices such as double ending. The government will modernize its rules, strengthen professionalism and improve the home-buying experience with a goal to make Ontario a leader in real estate standards.
  3. Establishing a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures in the Fair Housing Plan and any additional steps that are needed. The group will have a diverse range of expertise, including economists, academics, developers, community groups and the real estate sector.
  4. Educating consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
  5. Partnering with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.
  6. Making elevators in Ontario buildings more reliable by establishing timelines for elevator repair in consultation with the sector and the Technical Standards & Safety Authority (TSSA).
  7. Working with municipalities to better reflect the needs of a growing Greater Golden Horseshoe through an updated Growth Plan. New provisions will include requiring that municipalities  consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes. This will help support the goals of creating complete communities that are vibrant, transit-supportive and economically competitive, while doing more to address climate change, protect the region's natural heritage and prevent the loss of irreplaceable farmland. As part of the implementation of the Growth Plan for the Greater Golden Horseshoe, 2006, enough land was set aside in municipal official plans to accommodate forecasted growth to at least 2031. Based on discussions with municipalities across the region, the government is confident that there is enough serviced land to meet the Provincial Policy Statement requirement for a three year supply of residential units. The Greenbelt provides important protection of natural heritage and farmland, and neither the area of the Greenbelt or the rules about what can occur inside of it will be weakened. The upcoming Growth Plan will promote intensification around existing and planned transit stations and will promote higher densities in the suburbs to support transit.

Actions to Date
The government has taken a number of actions over recent months and years in order to support homebuyers, increase supply of affordable and rental housing and promote fairness. These include:
  • Helping more people purchase their first home by doubling the maximum Land Transfer Tax refund for eligible first-time homebuyers to $4,000. This means eligible homebuyers in Ontario pay no Land Transfer Tax on the first $368,000 of the cost of their first home.
  • Modernizing the Land Transfer Tax to reflect the current real estate market, including increasing rates on one or two single-family residence over $2 million. Revenue generated from the increased rates is being used to fund the enhancements to the First-Time Homebuyers Refund.
  • Making it easier for not-for-profit affordable housing providers to buy surplus government lands.
  • Introducing an inclusionary zoning framework for municipalities that will enable affordable housing units as part of residential developments.
  • Amending the Planning Act and the Development Charges Act to support second units, allowing homeowners to create rental units in their primary residence and creating additional supply.
  • Freezing the municipal property tax burden for  multi-residential apartment buildings in communities where these taxes are high.
  • Collecting information about Ontario's real estate market to support evidence-based policy development
Appendix: Data and Trends on the Real Estate Market
Ontario's housing market has seen very dynamic growth in recent years, with prices in the Greater Toronto Area and the Greater Golden Horseshoe rising significantly. This has been supported by economic fundamentals, including a growing population, rising employment, higher incomes and very low borrowing costs.
House prices have been rising at a robust pace in the Greater Toronto Area since the end of the 2008-09 recession.
After two consecutive years of double-digit gains, average house prices in the Toronto region reached $916,567 in March 2017, up 33.2 per cent from a year earlier.
See image "Toronto Home Resale Prices"
The Greater Toronto Area showed the sharpest rise in home prices in Ontario over the past two years.
While the growth rate of prices of homes in the Greater Vancouver Area have been slowing since August 2016 after the introduction of B.C.'s foreign-buyers tax, home prices have been climbing steadily in the Greater Toronto Area.
See image "MLS Home Price Index", "Greater Toronto Area Price Increases Outstrip Other Cities" and "Housing supply in Ontario seems to be aligning with demographics".
According to Urbanation, the average rent per square foot for new leases in the Greater Toronto Area condo market rose 11 per cent in the last quarter of 2016 compared to a year earlier, the fastest pace of growth since at least 2011.
The number of owners with more than one residential property has been rising steadily since 2000.

See image "Number of Owners With More Than One Residential Property in the GTHA: 2000-16".

Thursday, April 6, 2017

SOLD 81K OVER ASKING IN 7 DAYS!


123 BIRCHCLIFF AVE, SCARBOROUGH

April 2017 Toronto Real Estate Report


The Toronto Real Estate Board announced that Greater Toronto Area REALTORS® reported 12,077 residential sales through TREB's MLS® System in March 2017. This result represented a 17.7 per cent increase compared to the 10,260 sales reported in March 2016. For the TREB market area as a whole, annual sales growth was strongest for condominium apartments and detached houses.
The number of new listings also increased on a year-over-year basis, at 17,051 – a 15.2 per cent increase compared to March 2016. The strongest growth in new listings was experienced in the detached market segment. While new listings were up strongly compared to last year, the rate new listings growth was still lower than the rate of sales growth. As a result, GTA market conditions continued to tighten.
It has been encouraging to see that policymakers have not implemented any knee-jerk policies regarding the GTA housing market. Different levels of government are holding consultations with market stakeholders and TREB has participated and will continue to participate in these discussions. Policy makers must remember that it is the interplay between the demand for and supply of listings that influences price growth.
Strong competition between buyers continued to cause high levels of price growth in all major market segments. The MLS® Home Price Index (HPI) Composite Benchmark Price was up by 28.6 per cent year-over-year. For the TREB market area as a whole, the average selling price was up by 33.2 per cent, with similar annual rates of growth in the low-rise and condominium apartment segments.
Annual rates of price growth continued to accelerate in March as growth in sales outstripped growth in listings. A substantial period of months in which listings growth is greater than sales growth will be required to bring the GTA housing market back into balance.