With all the stuff that’s been in the news lately about non-residents being banned from buying property in Canada for the next couple of years, what does that mean for international property owners looking to sell?
In a nutshell? Nothing. The foreign buyers’ ban only applies to purchases, not sales. So if you’re ready to put your Canadian property on the market, you can.
However, you do need to keep in mind that there are some differences in the way non-residents are taxed. We talked to Property.ca agent Cameron Miller, who has worked with a number of international clients on purchases and sales, to get his insights on what non-resident sellers need to know before listing their properties.
“I’ve run into a number of situations where, say, parents have bought a place in Toronto for their kids while they go to university, figuring they can just sell it when the kids are done and pocket the profits,” he says. “But for non-residents, it isn’t as simple as that. I always recommend working with a lawyer and accountant who know their way around an international sale – and using a real estate agent with experience in this kind of complicated transaction.”
Taxes are different for non-residents – really different
The Canada Revenue Agency (CRA) wants to ensure they’ll get their money. So for non-resident, they withhold a lot more taxes than will actually be owed at the end of the day. You will face two possible scenarios:
Option 1: Pay 25% tax on the total selling price
At the time of the sale, the CRA will take a “non-resident withholding tax” of 25% of the property’s gross selling price. Which is an enormous amount of money. You will eventually get a lot of it back, but you’ll have to wait…and wait.
“The CRA can be very hard to deal with,” says Cameron. “To get money back from them can take years. Because of COVID, they’ve got a pretty significant backlog.”
Option 2: Pay 25% tax on your profit
To pay a lower withholding tax, get a lawyer to help you file a Certificate of Compliance and get it approved by the CRA. Cameron advises international sellers to reach out to an accountant several months before their sale to arrange the Certificate of Compliance.
In both cases, the funds are held in trust by your lawyer.
But don’t worry, that 25% is still not the final tax owing – what’s withheld is usually a lot higher than the taxes actually owed. Once you have filed a Canadian T1 tax return, you will likely get a chunk of it back.
Apart from the whole tax side of things, the process is pretty much the same as it is for a resident, although you may not be physically present for the transaction. However, please remember that this article is just a guideline – speak to your accountant and/or lawyer about how your specific sale will be taxed.
Looking for an agent with expertise with non-resident real estate sales? Connect with Cameron Miller.