When a non-resident sells a Canadian property, the vendor must give the buyer a clearance certificate issued by the Canadian Revenue Agency (CRA). Short of this certificate, the buyer can keep part of the selling price and could also be personally accountable 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.
Where a Canadian resident sells Canadian property, the seller will not be taxed on the capital gains of the sale. The resident-seller can allocate any residence as a principal residence as long as he occupies the property. If the property was not the seller’s primary residence for the years the he owned it, the seller must prorate the capital gain for all the years in which the property wasn’t assigned as a principal residence.
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. Conversely, 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. Consequently, if he possessed Canadian assets of great value, he will be taxed on the gains of the assets when leaving the country.
Such “deemed disposition” may also relate where a non-resident property owner dies or where a real estate property has been shifted to a person’s company or relative even without payment.
Canadian laws on selling real estate property are not as malleable as owning real estate property. The Canadian government takes 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 differs on the ownership, renting and selling of Canadian property, all of which must be in agreement with the Canadian Revenue Agency (CRA) and the Canadian Income Tax Act.
J C Loum