Canada Announces Possible 10% Speculation Tax for Foreign Homebuyers in Toronto

Asma Ahmed - | World

If a new municipal tax is approved by the Toronto city council to discourage real estate speculation, housing prices for foreign purchasers may soon be much higher.

Toronto Considers 10% Tax on Foreign Real Estate Purchases

The Toronto city council is contemplating a new tax on foreign buyers, called the Municipal Non-Resident Speculation Tax (MNRST), designed to discourage real estate speculation and enhance housing supply availability. If approved in the executive committee meeting next week, the tax would impose an extra 10% on the purchase price of residential properties starting in January 2025.

The primary goals of the MNRST are to safeguard housing supply and maintain affordability by dissuading international buyers, especially those not intending to live in the purchased property or those driven by speculative motives.

The proposed tax mirrors the province's Non-Resident Speculation Tax (NRST) implemented in 2017, charging foreign buyers 25% on certain property purchases in Ontario. The MNRST aims to deter real estate speculation, working alongside other land transfer-related impacts. Similar exemptions and refunds as the provincial tax will apply, including a rebate for foreign nationals becoming permanent residents within four years.

Commercial, industrial, and agricultural land, as well as multi-residential apartment complexes with six units or more, are exempt from the tax. Refugees and other protected individuals, as well as foreign nationals nominated by the Ontario Immigrant Nominee Program, are eligible to apply for such exemptions. Furthermore, properties acquired in a combined transaction with a Canadian citizen, permanent resident, nominee, or spouse who is a protected person will also be excluded.

The principal goal of the tax is to curb speculation, but in its first year, the city stands to gain as much as $15 million. After the government's prohibition on foreign house acquisitions is abolished after two years, the staff study suggests starting implementation on January 1, 2025. Revenue from provincial NRST on Toronto homes fell more than 65% from 2022 to 2023 as a result of the moratorium.

The executive committee will discuss the report on January 30. If approved, this tax could reshape Toronto's real estate landscape for foreign investors.

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Asma Ahmed
Asma Ahmed
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