Canada Real Estate: Sell Your Canadian Property
You don’t have to be a Canadian resident or citizen to purchase and own property in Canada.
Non-residents
Where a non-resident sells a Canadian property, the seller must give the buyer a clearance certificate issued by the Canadian Revenue Agency (CRA). Without this certificate, the buyer can keep part of the selling price and could also be personally liable to the Canadian Revenue Agency for any of the non-resident seller’s unpaid taxes. Once sale is completed, the Canadian government will deduct 50% of such sale as a withholding tax.
Residents
Where a Canadian resident sells Canadian property, the seller will not be taxed on the capital gains of the sale. The resident-seller can assign any residence as a principal residence as long as he “ordinarily inhabits” (occupies) the property. This requirement is very important because, let’s say you own many real estate properties, you have to decide which one should be your principal residence based on the capital gains for the year.
If the property was not the seller’s principal residence for all the years the seller owned it, the seller must prorate the capital gain for all the years in which the property wasn’t assigned as a principal residence.
Deemed Disposition
Changing the use of a real estate property from rental to principal residence could lead to a “deemed disposition” which brings about taxable capital gains. However, the seller could decide to ignore this gain until he actually sells the house.
When a property owner leaves Canada, there will be a “deemed disposition” of the capital property. Thus, if the seller owned Canadian assets of great value, he will be taxed on the gains of the assets when leaving the country.
Such “deemed disposition” may also apply where a non-resident property owner dies or where a real estate property has been transferred to a person’s company or relative even without payment.
Canadian laws on selling real estate property are not as flexible as owning real estate property. The Canadian government deducts 50% of sale of Canadian property by a non-resident, as a withholding tax and the non-resident selling the real estate property must also give the buyer a clearance certificate issued by the CRA. On the other hand, a Canadian resident selling a real estate property will not be taxed.
There are many tax implications in Canadian real estate which varies on the ownership, renting and selling of Canadian property; all of which must be in compliance with the Canadian Revenue Agency (CRA) and the Canadian Income Tax Act.
