What you need to know
While we regularly sell properties in Mississauga and the GTA, we are also sometimes contacted by Non-Resident Canadians or Foreigners who want to sell their homes or condos with our Team.
Non-residents avail of the same privileges of investing in the Canadian real estate market, just like other Canadian residents. By the same token, they must file taxes every year on any income that they earn through their property.
What is the process of selling a property for non residents
In addition to the regular selling process that we undertake for all our sellers (which involves free evaluation, preparing the property, staging, marketing, negotiations and final sale), there are other important steps that the seller must undertake.
Once the sale firms up, our Brokerage sends the documents to your (the seller’s lawyer), in order to close the transaction. This step is common for all sellers, resident or non resident. In addition to this, there are some extra steps that the seller’s and buyer’s lawyers must undertake.
The seller should contact his accountant as soon as the property has been sold to file taxes. Most of the work is done by the lawyers and the accountant.
The process below may sound overwhelming, but it is an easy and smooth process, when handled by good lawyers and accountants.
When a non-resident owner sells a Canadian property, the purchaser is required to withhold 25% (or up to 50% in case of rental properties) of the total purchase price. The amount is decided as per CRA guidelines and discretion.
Several forms and documents must be submitted before a transaction can go through. Hence, seeking professional advice before selling is always a good idea.
Here is a scenario, please note that this is just an example to help explain. This does not construe as legal or accounting advice. Kindly consult with qualified legal and accounting professionals for advice on your specific situation. So as an example, let’s say the seller sold a property for $500,000 and originally paid $200,000, ten years ago.
- Purchaser will withhold $125,000 = $500,000 x 25%. Typically, this is held in the seller’s lawyer’s trust account.
- Seller is required to file for a Certificate of Compliance. This must be done no later than 10 days after the actual sale to avoid penalties.
- The CRA will request payment or acceptable security of $75,000 = ($500,000 – $200,000) x 25%. Seller’s lawyer remits the $75,000 out of the $125,000 originally withheld to the CRA. CRA will then issue a Certificate of Compliance.
- Upon receipt of a copy of the Certificate of Compliance, the seller’s lawyer releases the remaining funds to the Seller which was initially held in trust, $50,000 ($125,000 –$75,000).
- After the end of the calendar year, upon the filing of the non-resident tax return, if the actual tax liability of the seller is approximately $50,000. The non-resident receives a refund of $25,000 ($75,000 – $50,000).
Disclaimer: E.&.O.E. The above scenario and numbers are just being roughly used to explain the process.
Remember, it is prudent and necessary to consult with legal, financial and real estate professionals to ensure you are taking the right steps while selling property in Canada as a Non Resident.
You should also check with the latest CRA guidelines for Non Residents selling a property in Canada, and proceed as directed.
The CRA is very vigilant regarding property sales by non-residents because they want to ensure the deal is secure and the non-resident owner has fulfilled all their monetary and tax obligations. If the seller fails to meet the CRA’s requirements or if they have not paid their taxes or notified the CRA of the sale, they can be heavily penalized.
End of the day, the point is that with the right tax advice, ample time for preparation, and timely submission of all documents and taxes, non-resident homeowners can successfully and efficiently sell property in Canada.
Team Kalia can Help You Sell Your Property in & around the GTA
Team Kalia has years of experience Buying and Selling properties for our non-resident real estate investor clients. From buying resale or pre-construction condos and homes to providing a la carte property management service, including finding top tenants for our non-resident landlord clients.
Team Kalia has been serving our local and overseas clients since 2003, and works with trustworthy teams of professionals and tradespeople. We can refer our clients to not only to lawyers, mortgage professionals and accountants, but also to handymen and other tradespeople, as needed.