What is the NRST?
The Non-Resident Speculation Tax (NRST) was introduced to address concerns about non-resident investors purchasing Ontario homes primarily for speculative purposes. Initially implemented in 2017 as a 15% levy on transactions within the Greater Golden Horseshoe Region, the NRST has since been expanded province-wide at a rate of 25%.
Imposed under the Ontario Land Transfer Tax Act (LTTA), the NRST functions as an additional land transfer tax payable when certain types of land are transferred to a "foreign entity" or "taxable trustee."
The NRST applies when all of the following conditions are met:
- The property qualifies as "designated land," which includes, in part, land containing six or fewer "single-family residences";
- There is a change in legal or beneficial ownership of that designated land; and
- The transferee is a "foreign entity" or "taxable trustee."
NRST Exemptions
Foreign individuals may qualify for a Non-Resident Speculation Tax exemption based on their immigration status at the time of purchase, provided certain conditions are met. An exemption may apply if the purchaser is:
- A nominee under the Ontario Immigrant Nominee Program (OINP), who has applied or certified to become a permanent resident before their nominee certificate expires;
- A protected person (refugee) under Canada's Immigration and Refugee Protection Act; or
- The spouse of a Canadian citizen, permanent resident, OINP nominee, or protected person, where both spouses are buying the property together.
In all cases, every additional joint purchaser must also be a Canadian citizen, permanent resident, nominee, or protected person. All joint buyers must certify that the property will be used as their principal residence.
Exemptions must be claimed at the time of property registration in Ontario's electronic system (Teraview) by completing the required forms. Purchasers should inform their real estate lawyer in advance. Exemptions are not available for unregistered transfers (e.g., beneficial ownership acquisitions), which are more complex and require professional assistance.
NRST Rebates
For purchases on or after March 29, 2022, only the Permanent Resident NRST Rebate is available, and the previous exemptions (discussed in the section above) are no longer applicable. Eligibility requires that the foreign purchaser:
- Becomes a permanent resident within four years of the purchase date;
- Owns the property solely or jointly only with his spouse; and
- Occupies the property as his principal residence—together with his spouse, if applicable—from within 60 days of purchase until the later of the rebate application date or the date all rebate conditions are met.
If spouses jointly own the property, the rebate is available once either spouse becomes a permanent resident, assuming all other requirements are met.
The rebate is claimed by submitting the Ontario Land Transfer Tax Refund/Rebate Affidavit and supporting documents to the Ontario Ministry of Finance within 90 days of becoming a permanent resident. If a Permanent Resident Card is not available within this period, other proof—such as a signed, dated "Confirmation of Permanent Residence"—can be used.
Rebates for Pre–March 29, 2022 Purchases
Homes bought before March 29, 2022, may qualify for one of the following:
- Previous NRST Rebate (Greater Golden Horseshoe properties);
- Former International Student NRST Rebate; or
- Former Foreign National Working in Ontario NRST Rebate.
Applications for these must be filed by the earlier of March 31, 2025, or four years from the date NRST became payable, using the same affidavit and supporting documents.
Special relief under section 20 of the Land Transfer Tax Act
Given the strict timing requirements for claiming the rebate, it is good news for taxpayers that section 20 of the LTTA grants the Ministry of Finance discretion to provide relief where "special circumstances" make it "inequitable" for the taxpayer to pay the full tax. However, this relief is not automatic, and persuading the Ministry of Finance to exercise this discretion can be challenging.
Yavari v Ontario (Minister of Finance), 2024 ONSC 5296: The First Reported NRST Decision
Yavari concerned a dispute between a taxpayer and the Ontario Minister of Finance over a Non-Resident Speculation Tax rebate. At the time of purchase, the taxpayer was a foreign national and international student who paid NRST on a home. She later applied for the NRST Rebate, available to foreign nationals who become permanent residents within four years of purchasing their property.
The taxpayer obtained permanent resident status four years and ten days after the purchase—just missing the four-year deadline. The delay was attributed to COVID-19–related disruptions in her immigration process. Her rebate application was denied. In response, the taxpayer not only challenged the rebate denial but also sought Section 20 Relief under the LTTA, which grants the Minister discretion to reduce or waive NRST liability in "special circumstances" where payment would be "inequitable."
She argued that the global pandemic qualified as such a circumstance. The Minister denied the relief request, relying almost entirely on general policy documents and without adequately addressing her individual situation. The taxpayer then sought judicial review.
The Ontario Divisional Court allowed the application and quashed the Minister's decision as unreasonable. Key reasons included:
- Failure to consider the taxpayer's specific circumstances;
- Failure to recognize the COVID-19 pandemic as a potential "special circumstance";
- Application of an unduly high threshold for what constitutes "special circumstances."
The Court also dismissed the Minister's procedural argument that the judicial review was premature, clarifying that the LTTA provides two distinct avenues for redress—the statutory appeal process and the discretionary Section 20 Relief mechanism—each subject to separate judicial remedies.
Pro tax tips – special circumstances under section 20 require a case-by-case analysis
The Yavari decision is a positive outcome for the taxpayer, who obtained substantive Section 20 Relief, and more broadly affirms that Section 20 Relief may be available to others facing extraordinary circumstances—even if they apply outside the four-year limit.
Combined with the technical nuances of the NRST, the case highlights the complexity of navigating NRST rules and still requires a case-by-case analysis. Therefore, it's highly recommended that a taxpayer consult with an experienced Canadian tax lawyer to evaluate the strength of the case while seeking section 20 special relief.
FAQ:
What are the conditions of the NRST rebate?
Note that a home purchased before March 29, 2022, may be eligible for a rebate of NRST under:
- The previous NRST Rebate, for a property purchased in the Greater Golden Horseshoe area;
- The former International Student NRST Rebate; or
- The former Foreign National Working in Ontario NRST Rebate.
For home purchases made on or after March 29, 2022, the only rebate available is the Permanent Resident NRST Rebate.
To be eligible for this rebate, the foreign purchaser must:
- Have become a permanent resident within four years of the home's purchase date;
- Own the property as a sole owner or hold the property jointly with only their spouse; and
- Have lived in the home, with his or her spouse if applicable, as their principal residence throughout the period starting within 60 days of the home purchase date, ending on the rebate application date or date that rebate conditions are met, whichever is later.
What are the conditions for the court to grant relief based on special circumstances under s.20 of the LTTA?
According to the decision in Yavari, the eligibility for the special relief under section 20 is not a high threshold and must take into consideration the taxpayer's specific situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
