An Increase to Nova Scotia’s Non-Resident Deed Transfer Tax (Copy)
If you’re a non-resident looking to purchase property in Nova Scotia, it’s crucial to understand the province’s Non-Resident Deed Transfer Tax. This tax applies to individuals who are not residents of Nova Scotia at the time of purchasing residential property and can significantly impact the overall cost of your investment. As of April 1, 2025, the provincial government plans to increase the tax rate from 5% to 10%, which will further affect non-resident buyers.
What Is the Non-Resident Deed Transfer Tax?
The Non-Resident Deed Transfer Tax is a one-time tax applied when a non-resident purchases a residential property in Nova Scotia. Currently, the tax is calculated at 5% of the property’s purchase price or assessed value (whichever is higher). However, this rate will double to 10% for property transactions signed after March 31, 2025.
This tax was originally introduced to support housing affordability for Nova Scotians by discouraging speculative buying from non-residents. The planned increase has sparked backlash from real estate stakeholders, as it will significantly raise the cost of investment for non-resident buyers.
Who Does It Apply To?
This tax applies to individuals who, at the time of purchase, are not permanent residents or Canadian citizens and do not meet the criteria for residency in Nova Scotia. Even if you are a Canadian citizen but live in another province, you may still be subject to this tax.
Residency Requirements:
To be considered a Nova Scotia resident and avoid this tax, you must:
Have a valid Nova Scotia driver’s license or provincial ID.
File your personal income taxes as a Nova Scotia resident.
Spend the majority of the year (183 days or more) in Nova Scotia.
For corporations, the tax applies if the company is controlled by non-residents. Buyers using corporate structures should consult a tax specialist to determine their liability.
Are There Any Exemptions?
Certain buyers may qualify for an exemption from the Non-Resident Deed Transfer Tax. Exemptions include:
New residents: If you move to Nova Scotia and establish residency within six months of purchasing the property, you may be eligible for an exemption.
Multi-unit residential buildings: Properties with at least 50% of the units rented out for residential use may qualify.
Inherited property: If a property is transferred due to inheritance, the tax may not apply.
Certain commercial or industrial properties: If the property is not primarily for residential use, an exemption may be possible.
To claim an exemption, buyers must submit proof of eligibility at the time of purchase. If a buyer claims residency but fails to meet the requirement within six months, they could be subject to retroactive tax collection and penalties.
How Does This Impact Buyers?
For non-residents looking to invest in Nova Scotia real estate, this tax significantly increases the cost of purchasing a property. With the tax set to double to 10% on April 1, 2025, the financial burden will become even greater. For example:
A $500,000 home would incur a $50,000 tax (up from $25,000).
A $750,000 home would require $75,000 in tax (up from $37,500).
This tax should be factored into the total closing costs, along with legal fees, property taxes, and potential renovation expenses. Buyers may also want to explore financing options that take these costs into account.
Additionally, the tax now applies based on ownership interest being transferred to non-residents. This means:
If a property is being transferred to multiple owners, only the portion of ownership interest transferred to non-residents is subject to the tax.
If two non-residents purchase a property and plan to move to Nova Scotia within six months, they initially won’t pay the tax. However, if only one provides proof of residency within the six-month period, the other will owe tax (plus interest and potential penalties) on their ownership share.
For agreements signed after June 30, 2023, the tax applies to all deed registrations where any ownership interest is granted to non-residents.
For agreements signed between April 1, 2022, and June 30, 2023, buyers have the option to calculate and pay the tax under the original or updated legislation.
Market Impact
The increased Non-Resident Deed Transfer Tax is expected to have direct and indirect effects on Nova Scotia’s real estate market:
Lower speculative demand: Since the introduction of the tax, fewer non-resident buyers have entered the market. The upcoming rate increase may further discourage non-resident purchases, potentially stabilizing home prices.
Increased local opportunities: With fewer non-resident buyers, more properties could remain available for Nova Scotians.
Potential shifts in investment: Some non-resident buyers may opt to invest in exempt multi-unit properties, increasing rental housing supply instead of purchasing single-family homes.
Declining property values in some areas: If demand from non-resident buyers drops significantly, certain markets that previously relied on out-of-province investors could experience price adjustments.
Tax Planning Strategies for Non-Residents
For those considering a real estate investment in Nova Scotia, here are some potential strategies to minimize tax burdens:
Plan residency status in advance: If moving to Nova Scotia is an option, ensure residency is established within six months of purchase to qualify for an exemption.
Consider property types carefully: Investing in multi-unit residential buildings may offer a tax exemption while generating rental income.
Work with professionals: Consulting a tax expert can help navigate the tax implications and structure purchases in a tax-efficient way.
What Should Buyers Do Next?
If you’re considering purchasing property in Nova Scotia as a non-resident, it’s crucial to factor in the increased deed transfer tax when planning your finances. Consulting with an accountant or financial advisor can help you:
Determine if you qualify for an exemption.
Plan for the additional tax expense.
Structure your purchase in a tax-efficient manner.
Final Thoughts
Nova Scotia’s planned increase to the Non-Resident Deed Transfer Tax is a significant change that will impact real estate investors from outside the province. Understanding your obligations and potential exemptions can help you prepare for the full cost of homeownership and avoid unexpected expenses.
For professional tax guidance, reach out to an accountant who specializes in Nova Scotia real estate taxes. Proper planning can help you make the most of your investment while staying compliant with provincial tax laws.
Disclaimer: The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.
No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.