Buying and Selling Property in Canada for Non-Residents
An individual is considered a non-resident of Canada if they:
- normally, customarily, or routinely live in another country, or
- do not have residential ties in Canada, and
-live outside Canada throughout the tax year, or
-stay in Canada for less than 183 day in the tax year
Buying
There are no restrictions for non-residents buying real estate in Victoria, BC (or anywhere else in Canada), neither are there any extra fees or tax implications at the time of purchase or closing. A non-resident may purchase as many properties as they desire. They may however be subject to Canadian Income Tax laws and like Canadian residents will encounter the following taxes and fees:
Property Transfer Tax (British Columbia): Payable at closing, the tax rate is 1% on the first $200,000 and 2% on the balance of the purchase price.
Goods and Services Tax: 5% tax on the purchase price of new and substantially renovated properties.
Municipal Property Tax: A purchaser is liable to pay the balance of the year's property taxes.
Bank Appraisal Fee (if financing required): Typical cost is $200-500.
Legal Fees: A non-resident purcahser will require a Canadian lawyer to transfer the title throught the Land Title Office and prepare mortgage documents. This costs $500-1200.
Mortgages
A downpayment of 35-50% is required of non-resident purchasers by most lenders, however financing may be arranged for lesser downpayments and are subject to a higher interest rate. A borrower must open a Canadian bank account from which the mortgage payments can be drawn. Qualifying for a Canadian mortgage is generally straight-forward, and would typically include an interview by phone, fax or email to discuss employment, assets and liabilities, and income. You will need confirmation of identity compliant with Canada's FINTRAC laws, that require information notarized by a lawyer if you are unable to meet the lender in person. Non-residents may also be asked for a letter from their bank in their country of residence. It normally takes a between 1 to 5 days for approval depending on your particular circumstance.
Income Tax and Residency
If an non-resident individual stays in Canada for 182 consecutive days, they may be considered a Canadian resident for income tax purposes. In addition, non-residents are required to pay tax on income earned in Canada; for example income earned from renting out a victoria property.
Non-Resident Sales
When a non-resident sells a Canadian property they are subject to taxation on any gain. On or before closing, the seller must provide the buyer a certificate of compliance to ensure the appropriate taxes will be paid fromteh sale proceeds. The certificate is issued by the Government of Canada and the seller's lawyer sends the funds directly to the government before dispersing the sale proceeds to the seller. If the certificate is not obtained by the seller, a holdback may be necessary to ensure the purchase will not be liable for the taxes. More information can be found here and the Canada Revenue Agency