Non-Resident Speculation Tax (NRST) in Ottawa Transactions
The Non-Resident Speculation Tax (NRST) is an new consideration for Ontario real estate transactions, yet many buyers and sellers only learn about it after signing an Agreement of Purchase and Sale (APS). Introduced by the Ontario provincial government to help cool housing demand from foreign purchasers, the NRST currently applies at a rate set by the government (most recently 25%) and is charged to certain buyers who are not citizens or permanent residents of Canada at the time they purchase residential property in Ontario. Its potential impact is significant, making it essential for all parties in a real estate deal to understand when the tax applies and how it affects a transaction.
Be aware that any government-imposed tax, including the NRST, is complex and subject to ongoing legislative changes. This blog post is intended only as a brief introduction to the topic and should not be relied upon as legal or tax advice. Buyers and sellers should always consult a qualified Ontario real estate lawyer or tax professional to understand how the NRST may apply to their specific transaction.
In the standard Ontario APS, there is no built-in clause that automatically addresses NRST, which means buyers must disclose their residency status to their lawyer early in the process. If the purchaser is a non-resident or buying on behalf of one, NRST may apply to the purchase price and must be paid at closing. Sellers should also be mindful: although the tax is owed by the buyer, a deal can be delayed—or collapse—if the buyer has not accounted for the additional tax and cannot close. This makes upfront communication crucial.
NRST is a tax on certain purchases of residential property by foreign individuals and entities. The tax is calculated on the full purchase price, or if the property has mixed uses it applies only on the value of the consideration allocated to the residential portion. It applies regardless of whether the purchaser intends to live in the property or rent it out. Importantly, the tax applies even if the non-resident is buying jointly with Canadian residents. Unless every buyer is exempt, the tax may be charged on the entire value of the property.
An example helps illustrate how NRST works. Suppose a non-resident international student—who is neither a permanent resident nor a Canadian citizen—purchases a condominium in Ottawa for personal use while studying. Even though the buyer plans to live in the unit and not speculate, NRST would still apply to the full purchase price at closing. If the student did not anticipate the tax, the additional 25% cost applied on top of the purchase price could jeopardize their ability to complete the transaction, emphasizing the importance for legal advice before signing the APS.
The NRST rules also include exemptions and rebates, though these are narrowly defined. Exemptions may apply when a buyer becomes a permanent resident within a specific time period after purchase or participates in certain protected programs. Rebates may also be available in limited cases, such as when the property is used as the buyer’s principal residence for a specified duration. Because these rules change periodically and rely on strict eligibility criteria, buyers should never rely on an exemption or rebate without confirmation from a lawyer.
In summary, the Non-Resident Speculation Tax is a major factor in many Ontario real estate transactions and can materially affect affordability, closing timelines, and deal certainty. By understanding when NRST applies—and by seeking proper legal guidance—buyers and sellers can avoid unexpected surprises and ensure their Agreement of Purchase and Sale reflects the full financial realities of the transaction.
The content on this post is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship.