Can non-Canadians participate in the Canadian real estate market? Sure, they can, but how does this work?
A non-resident is allowed to buy and sell residential property in Canada. They can obtain a mortgage loan from financial institutions as long as they fulfill the bank's requirements and are approved for equity loans. Non-residents can earn income on a property by renting it or using it as a rental property on Airbnb (or other similar short-term rental platforms).
While a non-Canadian resident can sell a property in Canada, certain measures must be taken before doing so. Non-resident property owners must file taxes on any income they earn through their property. They are also required to pay annual property taxes like regular Canadian residents. The property owner must submit the request for a clearance certificate within ten days of closing.
A non-resident owner is subject to a withholding tax of 25 per cent of the property's gross sales price. This amount must be remitted to the Canada Revenue Agency (CRA) There is an exception to this rule if the property is depreciable. A clearance certificate by the CRA is only issued if all taxes have been paid.
The Canadian Revenue Agency (CRA) is very vigilant regarding property sales by non-residents. The process is the same – the only difference is that the non-resident owner may not be physically present in Canada. 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.
However, 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 their home in Canada.
credit source: RE/MAX