Property Ownership Implications for Non-Residents: Nova Scotia Deed Transfer Tax, Nova Scotia Non-Resident Property Tax, and Federal Restrictions on Foreign Ownership
The Nova Scotia government introduced two tax measures impacting non-residents in the 2022-2023 provincial budget. Effective April 1, 2022, the Province is implementing the Nova Scotia Non-Resident Deed Transfer Tax (the “PDTT“) and Non-Resident Property Tax. The measures are proposed in the Financial Measures (2022) Act, introduced in the legislature on April 8, 2022 and currently undergoing committee review. The Act has not yet been proclaimed, and further details regarding the implementation of the taxes are expected to follow.
Both taxes apply to non-residents purchasing or owning residential property in Nova Scotia. If you think these taxes might apply to you or your property transaction, below are some key considerations:
- A residential property is one that is used or intended to be used for residential purposes, including any property that has three (3) or fewer dwelling units. A dwelling unit is a living area that has a private entrance, is occupied (or fit to be occupied), has kitchen facilities within the unit, and bathroom facilities not shared with occupants of other units.
- Non-resident ownership means that more than 50% of the ownership interest in the property is granted to non-residents of Nova Scotia. If 50% or more of the ownership interest in the property is held by residents of Nova Scotia, the non-resident taxes do not apply.
- Whether an individual, corporation, or trust is considered a Nova Scotia “resident” is based on several considerations:
- If an individual filed an income tax return for the previous year in Nova Scotia, they are a resident. An individual is further considered a resident if they have significant residential ties including things like a spouse or dependents in Nova Scotia, personal property in Nova Scotia, social or economic ties to Nova Scotia, a Nova Scotia driver’s license and coverage under Nova Scotia Health Insurance program (MSI).
- A corporation is a resident if its central management and control is in Nova Scotia, 50% or more of its directors are residents in Nova Scotia for income tax purposes, or 50% or more of the corporation’s shareholders or members are residents of Nova Scotia.
- Depending on the terms of the trust, if 50% or more of the people with the power to revoke or amend the trust are residents of Nova Scotia for income tax purposes, or if 50% or more of the beneficiaries are residents of Nova Scotia for income tax purposes, then the trust is a resident.
Nova Scotia Non-Resident Provincial Deed Transfer Tax (“PDTT“)
Nova Scotia non-residents purchasing a residential property will be subject to a 5% provincial tax levied on the purchase price or the assessed value of the property (whichever is greater). The PDTT is effective for all purchase and sale agreements and other specific property transfers on or after April 1, 2022. If the PDTT is applicable, it must be remitted by the closing date on the property transaction. The PDTT does not apply on residential property in the following circumstances:
- Property transactions with an Agreement of Purchase and Sale dated before April 1, 2022 are not subject to the PDTT, even if the property is transferred on or after April 1, 2022.
- Non-resident purchasers who move to the province within six (6) months of the transaction’s closing date are exempt from paying the PDTT.
- Transactions including residential property with more than three (3) dwelling units.
- The property is being transferred between current spouses or common law partners or former spouse or common law partners for the purpose of dividing marital assets.
- The property is being transferred to a partner, child, grandchild, parent or sibling under a will or to a person entitled to it under intestacy laws.
- The property is being transferred to a registered charity and is not to be used for business purposes.
- The deed is being registered to confirm, correct, modify or supplement a deed previously given; there is no payment; and the new deed does not include more property than the previous deed.
- The property is being transferred to a foreclosing mortgagee.
Nova Scotia Non-Resident Property Tax
Beginning April 1, 2022, residential property owned by non-residents of Nova Scotia is subject to an annual provincial property tax of $2 per $100 (or 2%) of the property’s assessed value. Properties are exempt from this tax in the following circumstances:
- If the residential property has more than three (3) dwelling units.
- If the property is continuously leased for twelve (12) months or longer to an individual and the individual resides at the property and pays rent.
- If the non-resident owner has purchased the property and is intending to move to the province within six (6) months.
Canada’s Ban on Foreign Property Ownership
Budget 2022 announced the federal government’s intention to ban non-Canadians from purchasing residential properties in Canada for two years. The proposed restrictions would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada.
Refugees, international students on the path to permanent residence, as well as individuals with work permits would be exempt.
The federal government has yet to provide key details regarding the scope of these measures. Until legislation is introduced and passed the full impact of these measures remains unknown.
Ultimately, these changes will impact non-residents and foreign owners looking to buy or own property in Nova Scotia. Cox and Palmer’s Real Property Group is available to assist with any questions regarding the measures discussed above. For more information on the implications these measures might have on your or your property transaction please contact Matt Dorreen (firstname.lastname@example.org) or Marc Beaubien (email@example.com) at Cox & Palmer. This article was written with contributions from Cox & Palmer’s Alexis Muscat, Articled Clerk.