Non Residents Buying in Canada
A Clearance Certificate is required for non residents who want to purchase a property in Canada. Ask your lawyer for an outline on how you can obtain the document. The certificate is approximately around $500, depending on a person’s circumstance. This already covers accountant fees to help you file a tax return. The certificate shows the CCRA that the property has no pending tax issues. This is crucial if there is a certain capital gain or profit when the sale is closed. In cases where the Clearance Certificate is not secured during its closing date, the holdback fee by lawyer or notary can be anywhere between 33 to 50 percent. The holdback can result to a major issue when there will be not enough financing completely pay off its mortgage. It usually takes 6 to 8 weeks for the Clearance Certificate to be processed.
Canada offers liberal real estate investments for non residents who want to own an investment property or vacation home in the country. Citizenship isn’t required for you to own a property in British Columbia. There may be restrictions on the duration of time that non residents can stay in Canada each year. There are income tax considerations that non residents need to know when they rent out their property or sell it to other buyers.
Non residents can permanently move to British Columbia and run a business as soon as they legally obtaining an immigrant status. The new Canadian immigration laws have been implemented since the year 2002.
Non residents can stay in British Columbia not more than 180 days in a year. And because of this reason, multinational buyers have also purchased homes in other nearby areas where they can stay for the remainder of the year.
The non residents who tend to overstay in BC can be considered as Canadian residents just for tax purposes and are taxed based on their word income, regardless of their contribution to the country of origin. For non residents who are currently renting out a real estate property, they should remit 25 percent of their total monthly income to the Revenue Canada in compliance to their Canadian Income Tax Return at the end of the year. If a certain non resident sells his property in Canada, the government also imposes a 25 percent holdback of its total proceeds pending sale. The owner can also obtain the Clearance Certificate before the sale to reduce holdback to a certain percentage of the gain.
A withholding tax is also implemented on the property’s gross selling price. The vendor can apply for a clearance certificate and reduce his non-resident withholding tax.
A non-resident can still apply for a tax refund by filling out an income tax return and report gain on the disposition. The refund can be due to the following circumstances:
Selling costs may not be deducted from the Clearance Certificate but it is a deductible on income tax return.
Capital gain is subject to 25 percent withholding tax on clearance certificate and only one half of the gain may be included in the tax return.
Withholding tax is usually based on a flat rate; tax returns are computed using individualized progressive rates.
Special claims are also available to the vendor.
Exchange rates and regulations change regularly. It is recommended that you confer with your immigration center or tax adviser regarding taxation and any legal issues.