Calculate Non-Resident Speculation Tax with the Canadian Mortgage App
In this article, we’ll look at the foreign buyer’s tax and who it applies to and run through an example together to see how much it might amount to.
What is a Foreign Buyer?
Are you not born in Canada, and you’re wondering if you’re considered a foreign buyer? A foreign buyer is typically someone who isn’t a resident of Canada or a Canadian citizen. Someone who lacks permanent ties to Canada.
Suppose you don’t fit into this category; there is no need to fret. You may still be exempt from the foreign buyer’s tax or be eligible for a rebate.
In Ontario, you’re exempt from the foreign buyer’s tax if you are a foreign national nominated for the Ontario Immigrant Nominee Program. If that’s the case and you also certify that you intend to become a permanent resident in Canada, you may be exempt from the foreign buyer’s tax.
Likewise, if you’re a foreign national with protections as a refugee, you may be exempt from the foreign buyer’s tax.
If you’re the spouse of a foreign national buying a property in Canada, you may also be exempt.
It’s important to note that the property must be designated as your primary residence in Canada. If that’s not the case, you may still be subject to the foreign buyer’s tax.
If you’re not eligible for an exemption, there is no need to worry. You might still be eligible for a rebate.
It’s essential to understand the difference between a rebate and an exemption. With a rebate, you would still be required to pay the foreign buyers’ tax, but you would receive the money back that you paid. Meanwhile, with an exemption, you wouldn’t need to pay it in the first place. Now that we have that out let’s talk about some potential rebates.
For example, suppose you’re a foreign national who becomes a Canadian permanent resident within four years of buying a property in Canada. In that case, you can be eligible for a rebate of the foreign buyer’s tax you paid.
If you’re an international student who enrolls in a Canadian institution within two years of buying a property in Canada, you should be eligible for a rebate.
Lastly, if you’re a foreign national who has been working in Ontario continuously for at least one year after buying the property, you should be eligible for the rebate.
The Foreign Buyers Tax
Both Ontario and B.C. have foreign buyers’ taxes. It’s also referred to as a non-resident speculation tax. In Ontario, the tax is 25% of the purchase price, while in B.C. It’s 20% of the purchase price. The taxes only apply to specific regions in those provinces.
To help better understand the foreign buyer’s tax, let’s run through an example together.
If you bought a home for $1,000,000 in Toronto, you’d be required to pay a tax of $250,000 (25%), assuming you weren’t eligible for any exemptions or rebates. You’d owe this at closing.
The idea is to protect Canadian real estate from a speculative investment that drives up the price of homeownership for locals just trying to afford a home for their families to live in.
How the Canadian Mortgage App Can Help
You’ll be happy to know that the foreign buyer tax is built into the Canadian Mortgage App. If the Ontario or B.C. foreign buyer tax applies to you, you can select the appropriate tax rate, either 25% or 20%, and it will automatically be applied to you. It’s that easy!
What are you waiting for? Download the Canadian Mortgage App today to try it out.