Foreign Buyers Guide
An Overview for Non-Residents
Non-Resident BuyersThere 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:
Currently in review, page will be updated as soon as declared.
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.
- Non-Residents, Canada Revenue Agency www.cra-arc.gc.ca/tax/nonresidents/individuals/nonres-e.html
- Tax Treaties, Canada Revenue Agency www.cra-arc.gc.ca/tax/nonresidents/treaty-e.html
Non-Resident SellersWhen 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 CRA has received either a prepayment on account of the taxes owing or appropriate security for the prepayment.
On January 1, 2004, the CRA 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 CRA.
- Procedures Concerning the Disposition of Taxable Canadian Property by Non-Residents of Canada, Canada Revenue Agency www.cra-arc.gc.ca/E/pub/tp/ic72-17r5/README.html
RULES for Non Resident Property OwnersRental Property NR6
If you purchase property that you rent out, you have to file an NR6 form before the first month's rent is received. This form allows you or your agent to remit taxes on your net estimated rental income vs. remitting 25% of your gross rental income. The NR6 form is a joint election between yourself as the owner and your agent stating that you will file a Section 216 Canadian tax return by June 30th of the following year and pay any taxes due by April 30th of the same year.
You will need details of your anticipated expenses plus the name, address and phone number of your Canadian agent. If you have no agent, you must remit 25% of your rental income to the government by the 15th of the month following the month in which the rent was received. In other words, January you collect $1000 in rent, and then by February 15, you have to pay $250 to CRA.
Section 216 Returns
This is a special rental income return that is due to be filed by June 30th of the following year. I.e. your 2012 return is due June 30, 2013. If taxes are payable, they are due April 30th and interest accumulates on the amount due after this date. The return calculates taxes due on your rental profit. Allowable expenses include:
- Mortgage interest (not payments)
- Property taxes
- Repairs and maintenance
- Office supplies (receipt books etc)
- Travel (for you to do or supervise repairs at the unit but these are limited to airfare and rental car - no hotel)
Frequently Asked QuestionsWill buying a house or a business help my immigration to Canada?
Buying a house does not increase chances of entry, nor does it hurt. The purchase of a home certainly shows a connection to Canada and the home is ultimately treated as a part of the overall net worth of the individual, but simply owning a house and living here, as a visitor will not affect the selection process. Buying a business, however, could result in a faster entry into Canada based on a temporary work permit. Buying a business must be part of a comprehensive immigration strategy. The purchase must be strategized with other qualifying factors, such as overall asset base, the projected performance of the business and previous business experience. These important aspects are examined and must be approved by the provincial government and/or the federal immigration department before any business is purchased. It is best to seek professional taxation and legal advice prior to purchasing a home or business.
As a foreigner can I get a mortgage?
The answer is yes. The requirements for obtaining a mortgage to finance a purchase will depend on the institution. Institutions will usually require a letter of introduction from the previous banking facility with which the foreigner has done business in his or her own home country. Previous income in the home country will also be verified. Also, institutions may require a greater percentage of the purchase price as a down payment.
How long can I stay in Canada? (Can I just go out for a day and come back?)
As a visitor, a person is generally allowed to remain in Canada up to 182 days (or six months). The immigration officer can make a decision to restrict the visitor to a shorter time, but if the officer makes no comment, the visitor can assume six months. The six month period in NOT per calendar year, but this time period is granted on each occasion that the person comes into Canada. There is no corresponding regulation in the Immigration Act (IRPA) that states the person has to remain out of Canada for six months before returning, so multiple entries can be allowed. You cannot, however, "flagpole" continuously, leaving Canada for a few days and then returning to Canada. Although such re-entry may be allowed on one or two occasions, the person does run a risk of being refused entry into Canada because he or she is living in Canada as a resident under the guise of being a visitor. The foreign national must maintain substantial roots with his or her home country including owning or leasing a home (which home should be worth more than the second home in Canada), having utility bills, credit card statements, driver’s licence, a health coverage card, bank statements and tax returns all showing permanence in the home country. Another consequence of staying in Canada for more than 182 days of the year can be Canada Revenue Agency declaring the visitor to be a Canadian taxpayer. If that becomes the case, then the visitor will be required to pay tax in Canada on ALL worldwide income including the income earned in the home country. Canada does have tax treaties with many countries, such as the USA, to avoid double taxation, but it is imperative that if a foreign national is planning on spending more than 182 days in Canada, then immediate taxation advice should be sought.
Note: The above is provided for informational purposes only and does not constitute professional advice. For more information, consult legal, financial professionals, as appropriate.
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