Toronto May Impose Foreign Buyer Tax on City’s Real Estate

A for sale sign is displayed outside a home in Toronto on December 13, 2021. (REUTERS/Carlos Osorio)

The City of Toronto may soon have a foreign buyer tax on local real estate, according to a report to the executive committee.

The report from chief financial officer Stephen Conforti is recommending a 10 percent tax for foreign buyers of residential properties in Toronto. Dubbed the Municipal Non-Resident Speculation Tax (MNRST), the recommendation is set to be discussed at the Jan. 30 committee meeting.

“The primary objective of the MNRST is to safeguard and enhance the availability of residential housing supply and to maintain a level of affordability in the residential real estate market by discouraging international buyers from purchasing property in the City of Toronto,” the report says.

Foreign buyers would be paying the MNRST on the full purchase price of the transfer of land, according to a City of Toronto document. The city estimates it will bring in $15 million in revenue, however, it’s not meant to be a money-maker, Mr. Conforti said in the report.

“The introduction of an MNRST is primarily being recommended as a policy tool, with the objective of curbing real estate speculation, rather than a tool to maximize revenue generation,” he wrote.

While the tax is not primarily focused on revenue building, the city says the money will help it develop a balanced budget.

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“As revenues are realized from the MNRST and introduction of other financial actions, the city can rely less on one-time bridging actions required to develop a balanced budget,” the document said.

Toronto’s MNRST would mirror the province’s non-resident speculation tax (NRST), which puts a 25 percent levy on the purchase price of certain residential properties in Ontario.

If passed, the policy would be implemented in Jan. 2025.

According to the city document, any foreign homebuyers who become permanent residents within four years of buying the property will be able to apply for a full rebate of both the city and provincial taxes.

Federal Ban on Non-Canadian Home Purchases

Revenue estimates were made under the assumption the Prohibition on the Purchase of Residential Property by Non-Canadians Act that was put in place by the federal government will not be extended past this year. The act is set to expire in December 2024.

Put into effect in January 2023, the act has already had several amendments to expand the exemptions to the rule, such as allowing foreign ownership in the Canadian real estate market for development purposes as well as for those holding a work permit for Canada.

The government also repealed a section of the regulations in March 2023 so that the prohibition doesn’t apply to “vacant land zoned for residential and mixed use,” which it says can now be purchased by non-Canadian buyers and “used for any purpose ... including residential development.”

In April 2023, the federal government further expanded exceptions to allow temporary foreign workers to purchase homes in Canada. It also lifted all restrictions that prevented foreigners from purchasing vacant land.

“Amendments repeal the vacant land provision from the definition of residential property so the prohibition does not apply to vacant lands,” the housing ministry said in a statement. “In other words, the purchase by non-Canadians of vacant land or any other property that does not actually have a dwelling unit on it will be permitted.”