There are no restrictions for non-residents purchasing
real estate in Canada, though they may become subject to Canadian income tax laws,
and will certainly encounter the following taxes on their transactions:
Property Transfer Tax (British Columbia) – The
tax rate is one per cent on the first $200,000 of the property's fair market value
and two per cent on the remaining fair market value. For more information, visit
the Government of British Columbia’s Property Taxation Branch’s website
at www.rev.gov.bc.ca/rpt.
Harmonized Sales Tax (Canada) – The 12% HST
applies to the purchase price of newly constructed and substantially renovated
homes.
Property Taxes (municipal) – If the seller has
already paid the full year’s property taxes to the municipality, the buyer
will have to reimburse them for the remainder of the year’s taxes.
Residence Status and Income Tax
If non-residents stay in Canada for more than 182 consecutive days, they may be
considered Canadian residents for Canadian income tax purposes.
Non-residents of Canada pay tax on income received
from sources in Canada. The type of tax paid, and the requirement to file income
tax returns, depends on the type of income received.
Canada has tax treaties with many countries, including
the United States. A tax treaty is designed to avoid double taxation for people
who would otherwise pay tax on the same income in two countries.
More information:
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
www.ccra-adrc.gc.ca/tax/nonresidents/treaty-e.html
Cross Border Tax Issues: The Canadian Perspective, Reinhold G. Krahn. Vancouver:
Lawson Lundell, December 2000
www.lawsonlundell.com/resources/CrossBorderTaxIssues.pdf
Non-Resident Sales
When selling or disposing of Canadian real estate, non-residents must notify the
Canadian government within ten days of the completion of the transaction to obtain
a certificate of compliance. A certificate of compliance will only be issued if
the CCRA has received either a prepayment on account of the taxes owing or appropriate
security for the prepayment.
On January 1, 2004, the CCRA will start charging a
financial penalty to non-resident owners of taxable property in Canada who sell
that property and do not, within ten days, provide notice of the sale to the CCRA.
In other words, CCRA is tightening its tax reporting
condition for non-residents who own Canadian property and will charge them the
greater of either $100 or $25 times the number of days beyond the ten that pass
before the sales notice is filed with CCRA. For example, if a non-resident sells
taxable Canadian property and does not notify CCRA until 21 days after the ten-day
grace period, that individual will be charged a $525 penalty ($25 x 21 days).
There are exceptions to this new policy, though an
accountant or lawyer is best suited to interpret their applicability in a given
situation. An individual can also apply to waive or cancel the penalty through
a government “fairness committee.”
More information:
Procedures Concerning the Disposition of Taxable Canadian
Property by Non-Residents of Canada, Canada Customs and Revenue Agency
www.ccra-adrc.gc.ca/E/pub/tp/ic72-17r4/ic72-17r4-e.html
“Tax Obligations Imposed on Non-Resident Vendors Disposing of Real Property
in Canada.” Real Estate Update, Lawson Lundell, Fall 2001
www.lawsonlundell.com/resources/RealEstateUpdate.pdf
Note: The above is provided for informational purposes only and does not constitute
professional advice. For more information, consult legal, financial and real estate
professionals, as appropriate.
British Columbia Real Estate Association – December
18, 2003
As you probably know, extra attention must be provided when you assist a non-resident person acquiring or disposing of real estate. A number of legal and accounting issues may arise when non-residents purchase or sell property in British Columbia.
To help those clients and to help you assist those clients, we have added some information to our website. This information should answer most of the questions that your clients may have. The page can be found at http://www.bellspag.com/legalissues/non-residents-real-estate.html
We hope you will find this information useful when assisting non-residents with their purchase or sale of property. Should you require any further information with respect to this issue or any other issues which require our assistance, please contact us.
Tony Spagnuolo
Direct Phone: 604-949-7306
Email: tonys@bellspag.com
BELL SPAGNUOLO LEGAL OFFICES
"the leaders in residential real estate"
Office Phone: 604-461-2024
Office Fax: 604-461-8976
Office Email: bs@bellspag.com
Website: www.bellspag.com
