Purchasing a property in Canada
- There are no restrictions for non-residents to purchase real estate in Canada.
- No tax implications or extra fees at time of purchase
- Non-residents can purchase as many properties as they wish in Canada
- For rental properties non-residents must file Canadian tax return
Arranging a Canadian Mortgage for Non-Residents
- Banks and lenders usually require non-residents a minimum 25-50% payment. It is possible to arrange financing with less than the 25% down payment however these lenders charge a higher rate of interest.
- Personal information required including – assets/liabilities, employment/income verification, tax returns, credit bureau or bankers reports, down payment confirmation, identification and real estate appraisal
- You will need to open a Canadian bank account for mortgage payments to be drawn from
- You will require the services of a Canadian lawyer or notary public to prepare mortgage documents and registration at the Land Titles office
Non-Residents Selling a Canadian property
3 stages in the collection of income taxes associated with the sale of real estate by non-residents
- Initial withholding Amount – 25% of gross sale proceeds until clearance certificate is received by Canadian Customs and Revenue Agency in connection with the sale of the property
- Clearance Certificate – application made to CCRA. Upon receipt the funds being withheld is reduced to 25% of the capital gains on the property
- Filing of Canadian Income Tax Return – Income tax return must be filed for the year in which the sale occurs.
When Calculating capital gains tax for Clearance Certificate Purchases sellers can only claim:
- The original purchase price
- Property transfer tax
- Legal fees and disbursements on the original purchase
- Cost of furnishings included in the sale
- Strata corporation special assessments
- GST on the original purchase price
- Mortgage interest (if appropriate elections on the tax return have been filed to have the mortgage interest capitalized)
Capital Gains Tax
- Only 50% of the capital gain is taxable
- Clearance certificates can take 6-8 weeks to be obtained
- If sale completes before the clearance certificate is issued, 25-50% of the selling price will have to be held back from the seller’s proceed until certificate issued
- Non-residents are encouraged to contact a Canadian accountant or CCRA for further information on marginal tax rates for non-residents.
- CCRA has a website at www.ccra-ardc.gc.ca
- Non-Residents, Canada Customs and Revenue Agency: www.ccra-adrc.gc.ca/tax/nonresidents/individuals/nonres-e.html
- Tax Treaties, Canada Customs and Revenue Agency