On April 1, 2022, the Province of Nova Scotia implemented a new non-residential deed transfer tax called the Non-Resident Provincial Deed Transfer Tax. This tax will affect property transactions in Nova Scotia.
Non-Resident Provincial Deed Transfer Tax
The Non-resident Deed Transfer and Property Taxes Act applies to the transfer of ownership of non-residential properties, such as commercial and industrial properties, within the province of Nova Scotia. This new tax will be applied at a rate of 2% of the purchase price of the property, with certain exceptions. The purpose of this tax is to make non-residential property ownership more accessible to Nova Scotians, as it is believed that non-resident ownership has contributed to the increase in property prices in the province. This new tax will be administered by the Department of Municipal Affairs, and will be collected at the time of the transfer of ownership. It is important for anyone considering the purchase of a non-residential property in Nova Scotia to be aware of this new tax, and to factor it into their financial planning.
As of April 1, 2022, non-residents of Nova Scotia are required to pay the Provincial Non-Resident Deed Transfer Tax (PDTT) when purchasing or transferring a residential property in the province. This tax is in addition to the standard municipal deed transfer tax that is normally collected on such transactions. The PDTT was introduced as part of the Financial Measures (2022) Act, which was passed by the Nova Scotia legislature and given royal assent on April 22, 2022. The purpose of this tax is to address the growing trend of non-resident real estate ownership in Nova Scotia, which is perceived as making real estate in the province less accessible to residents.
The Non-Resident Provincial Deed Transfer Tax (PDTT) is a tax on the transfer of residential property in Nova Scotia to non-residents. The tax will be applied at the time of purchase and is in addition to the municipal deed transfer tax. The PDTT will take effect on April 1, 2022. The Province has announced that the Non Resident Property Tax component of the Act will not be implemented, which would have been an annual charge of $2 per assessment for non-resident property owners in Nova Scotia. This article will focus on the PDTT as it pertains to residential real estate transactions.
Important Details to be Aware of:
The Nova Scotia government has implemented a Non-Resident Provincial Deed Transfer Tax (PDTT) for residential property purchases by non-residents of the province.
This tax will be applied at a rate of 5% at the time of closing. However, if the purchaser is planning to move to Nova Scotia and will be using the property as their primary residence, they will be exempt from the PDTT as long as they can provide proof of their residency within 6 months of the purchase.
To be considered a resident of Nova Scotia, you must either pay income tax in the province or, if you are a corporation, have your central management and control in Nova Scotia and at least 50% of your directors, shareholders, and members as residents of the province.
Under the Act, a "residential property" is defined as a property that is designated for residential use, meaning that it is not used for commercial or resource purposes. It must also have three or fewer dwelling units, such as apartments.
The Non-Resident Deed Transfer Tax and Non-Resident Property Tax will only apply if more than 50% of the ownership in a property is held by non-residents. This means that if a resident and non-resident jointly own a property with equal ownership stakes, they will not be subject to these taxes. However, if two non-residents and one resident own a property together with equal ownership stakes, they will be required to pay the Non-Resident Deed Transfer Tax and Non-Resident Property Tax.
The Nova Scotia Non-Resident Provincial Deed Transfer Tax is a tax on the transfer of ownership of residential properties that will be owned by non-residents. This tax applies to transactions where more than 50% of the ownership interest in the property will be held by non-residents, and is calculated as 5% of either the sale price or the assessed value of the property, whichever is greater. The tax must be paid at the time of closing on the property
The non-resident deed transfer tax will not be applied to:
- Transfers to non-residents who have more than 50% ownership interest and who plan to become residents within 6 months of the transfer, as long as they provide proof of their change in residency within 6 months
- Property transfers between current spouses or common law partners
- Property transfers between former spouses or common law partners that are related to the division of matrimonial property
- Property transfers that are part of agreements made prior to April 1, 2022
- Property transfers that result from foreclosing on a mortgage
- Property transfers from an executor to a beneficiary in a will, if the beneficiary is a close family member of the deceased
- Property transfers from an estate administrator to the person entitled to benefit from the estate in the event of intestacy.
The new Non-Resident Provincial Deed Transfer Tax, which took effect on April 1, 2022, has caused concern for clients. It is not yet known how these changes will affect the availability of residential real estate for consumers. It will be necessary to determine if the tax applies to each transaction and if there are any ways to reduce it.
Further details can be found using the following link: Non-resident Deed Transfer Tax and Property Tax (novascotia.ca)