Selling Property in Canada

Requirements for selling property in Canada...

When a non-resident sells Canadian real estate, he/she is required to pay the appropriate amount of taxes on any capital gain. The normal Canadian tax rates will be applied to 50 percent of the gain. However, a non-resident is required to pay an estimate of the tax before the sale, an amount equal to 25 percent of the gain. This amount is to be retained by the seller's lawyer until such time as a clearance certificate is received from the Canada Revenue Agency (CRA) in connection with the sale of the property. Upon payment, the CRA will issue a clearance certificate to the seller, but not until there has been a contract of purchase and sale with all subjects (conditions) removed. The wait for the certificate is usually 6 to 8 weeks. If the certificate is not obtained, the purchaser is required to withhold from the sale proceeds, a percentage of the selling price (usually 25 to 50 percent).

On or before the closing date, the mortgage money is transferred to the seller's lawyer and then to the seller, and the title is then transferred into the buyer's name.

The non-resident seller should file a Canadian income tax return for the year in which the sale occurs and should expect to receive a refund of a portion of the taxes paid. The taxation of Canadian real estate depends on whether the use of the property is for a principal residence, an active business or as a rental property. If it is used as a rental property, a 25 percent non-resident tax must be paid on the gross rent a tenant pays. However, if you use a professional property manager, the manager will, by law, withhold 25 percent of the gross rental revenue at source to be remitted to the Canada Revenue Agency. Then on or before 31 March of the following year, the property manager issues an NR4 form and you then have the right to file a Canadian tax return. The tax return is due before 30 June and enables you to claim expenses against that income and potentially request a refund.

Many countries, such as the US, have tax treaties with Canada that prevent you from being taxed in both Canada and your home country. It is advisable to contact a tax accountant in your country for more information.

Further Information

Information by Nicola Way of AssignmentsCanada.ca and BestHomesBC.com AssignmentsCanada.ca is Canada's only property assignments web site. BestHomesBC.com lists off-plan and resale homes throughout British Columbia +1.604.781.9279 BestHomesBC.com / AssignmentsCanada.ca Copyright © AssignmentsCanada.ca 2004-2014 All Rights Reserved