Non-Resident Provincial Deed Transfer Tax

Effective April 1, 2022, the Province of Nova Scotia has introduced a new non-residential deed transfer tax which will directly impact property transactions within Nova Scotia: the Non-Resident Provincial Deed Transfer Tax.

Non-Resident Provincial Deed Transfer Tax

Bill No. 149, also known as the Financial Measures (2022) Act, was passed by the Nova Scotia Legislature and given Royal Assent on April 22, 2022. The Financial Measures (2022) Act is a piece of omnibus legislation, meaning that it amends or affects several other acts or regulations. One of the most notable changes set out in the Financial Measures (2022) Act was the creation of the Non-resident Deed Transfer and Property Taxes Act, which was backdated and took effect on April 1, 2022. This legislation was introduced as a measure to address the perception that real estate ownership was inaccessible to Nova Scotians due to the climb in non resident purchases over the last several years.

The Provincial Non-Resident Deed Transfer Tax (PDTT) is a deed transfer tax for non-residents of Nova Scotia that is applied at the time of purchase/transfer of a residential property meeting certain criteria. This provincial deed transfer tax applies in addition to the municipal deed transfer tax historically paid on property transfers and where payable, is remitted at the time of closing.

The Province has since announced that the Non Resident Property Tax component of the Act will not be proceeding. The tax was to be an annual charge of $2.00 per assessment for every Non Resident owning property in Nova Scotia. The scope of this article will be limited to the non resident deed transfer tax charged on residential real estate transactions taking place after April 1^st, 2022.

Need to know information:

• Residential property purchasers who are non-residents of Nova Scotia will be required to pay a deed transfer tax rate of five per cent (5%) at the time of closing.

• If a purchaser is planning to move to Nova Scotia to live and buys a home, the purchaser will be exempt from the deed transfer tax – but will need to confirm their residency in Nova Scotia within six (6) months via documented proof.

• The Act defines a resident of Nova Scotia as:
  • an individual who pays income tax in Nova Scotia, or a corporation which has:
    • its central management and control in Nova Scotia;
    • 50% or more of its directors as residents; and
    • 50% or more of its shareholders or members as residents.

• The Act defines a “residential property” as a property that:
  • is officially classified as “residential” (i.e., none of the property is for commercial or resource use); and has three or less “dwelling units” (i.e., apartments).

• Both the deed transfer tax and the non-resident property tax only apply in situations where more than 50% of the ownership interest in the property is or would be held by non-residents. For example, if a resident and non-resident bought and owned a property together and had equal ownership interests, they would not have to pay the deed transfer tax or the non-resident property tax rates. However, if two non-residents and one resident bought and owned a property together and had equal ownership interests, they would have to pay the deed transfer tax and the non-resident property tax rates.

• The non-resident deed transfer tax applies to the registration of any deed for a residential property that would grant more than 50% of the ownership interest to non-residents. The tax is set at 5% of either the sale price or the assessed value of the property (whichever is greater).

• The non-resident deed transfer tax does not apply to:
  • transfers to non-residents who hold at least 50% of the ownership interest and who confirm in an affidavit that they intend to become a resident within 6 months of the transfer, and provide proof of the change of residency within 6 months of the transfer
  • transfers between current spouses or common law partners
  • transfers between former spouses or common law partners, if the transfer is related to the division of matrimonial property
  • transfers related to agreements of purchase and sale entered into before April 1, 2022
  • transfers related to foreclosing a mortgage
  • transfers from an executor to a beneficiary under a will, if the beneficiary is a close family member of the testator
  • transfers from the administrator of an estate to the person entitled to benefit from the estate in an intestacy

These changes have caused significant concern for clients and have added a logistical and administrative burden on those within the real estate industry who assist residential purchasers. Whether these measures impact the scarcity of residential real estate for consumer, remains to be seen. What is clear is that each transaction will require an assessment against these new measures to see whether the tax is applicable and whether there are any strategies to mitigate it.

Further details can be found using the following link: Non-resident Deed Transfer Tax and Property Tax (novascotia.ca)

The lawyers at Patterson Law are here to advise you and assist you in navigating these changes. Please contact any member of our team if you require legal assistance in understanding these changes or to assist in a successful completion of your real estate matter. 

This article is intended for information purposes only and does not constitute legal advice or a legal opinion. If you require further information or legal advice, Patterson Law would be pleased to discuss the issues addressed in this publication.