Is the process for a non-resident selling property in Canada different than that of a Canadian citizen? And is it more or less complex? As a non-resident selling Canadian property, in order to be successful, you’ll need to know the ins and outs, and our guide is here to help. With proper planning and the assistance of an expert real estate agent, you can successfully sell your property and achieve your desired outcome.
Selling Property in Canada as a Non-Canadian Resident Owner
Non-residents are allowed to buy and sell residential property in Canada.
Indeed, non-residents can enjoy many of the same benefits of delving into the Canadian real estate market as residents do. A non-resident selling property in Canada can obtain a mortgage loan from financial institutions as long as they fulfill the bank’s requirements and are approved for an equity loan. Non-resident property owners can also earn income on a property in Canada by renting it out long-term or listing it as a short-term rental property on Airbnb (or other similar short-term rental platforms).
At the same time, however, non-resident property owners should know beforehand that they are required to file taxes on any income they earn through their properties. They are also required to pay annual property taxes, just like regular Canadian residents.
Suffice it to say while a non-resident selling Canadian property is not unusual, certain measures must be taken before doing so. Let’s get acquainted with a few of these items.
Hiring a Real Estate Agent with Experience Assisting Non-Residents in Selling Property in Canada
As a non-resident selling Canadian property, the first step in getting ready to sell is to hire a licensed real estate agent who specializes in working with non-residents. Your agent should also have experience and knowledge of the local market, plus zoning rules and regulations, should you want to alter your property before the sale. An experienced real estate agent can provide essential advice and guidance throughout the selling process, will help you find potential buyers and will work to complete the transaction on your behalf, saving you a substantial amount of time while helping eliminate many of the headaches and hassle associated with selling property in Canada as a non-resident.
Getting Your Property Appraised
It’s essential to determine an accurate market value of your property before putting it up for sale. If you overprice the property, it could linger on the market longer than you want, and if you underprice it, you’ll be unable to maximize your profit. Your real estate agent or one of their licensed contacts can conduct the appraisal.
Determining Your Pricing and Selling Strategy
Next, you need to determine your pricing and selling strategy. To effectively price a property, it’s crucial to have a realistic understanding of trends in your area. Should you price at market value, above it or below it? Is it a sellers’ market, do buyers have the upper hand, or is the market more or less balanced?
Setting a fair price for your home is essential. Overpricing may seem tempting in a low-inventory market, but it can result in your home sitting on the market for an extended period of time. Competing properties at market value are more likely to sell quickly, while your listing becomes stale, making it harder to negotiate your desired price when a buyer finally comes along.
Creating an effective marketing plan that showcases your property’s unique features and attracts potential buyers is also vital. Lastly, you’ll have to decide if you are willing to negotiate the sale price and how much you are willing to spend on repairs, upgrades, or staging your property to create curb appeal and a great first impression.
Applying for a Clearance Certificate
When a non-resident owner sells a Canadian property, they must apply for a Clearance Certificate. This certificate confirms that you have paid all necessary taxes related to your property ownership in Canada. This can take up to six months to clear after the date of closing, so it’s recommended that you apply for the certificate early in the selling process. If you choose to wait until after the deal is finalized, you must submit the request for a Clearance Certificate within 10 days of your closing.
A non-resident owner is subject to a non-resident withholding tax of 25% of the property’s gross sale price as a security deposit until they file their Canadian tax return, but this rate could be reduced if there is a tax treaty between Canada and the non-resident’s home country. The withholding rate increases to 50% if the realty in question is a rental property.
A non-Canadian resident owner can request to have the non-resident tax withheld, but this will require filing the required forms with the Canada Revenue Agency (CRA). The property owner will also need a Certificate of Compliance.
If the non-resident owners are selling a property they have been renting out, they must file Section 216 returns to ensure they have reported their rental income and expenses and have paid their taxes. A Clearance Certificate by the CRA is only issued if all taxes have been paid.
If a non-resident selling property in Canada chooses not to obtain a Clearance Certificate, they are still required to notify the CRA within ten days of the disposition of the property. If this is not done, the CRA can penalize the non-resident owner a penalty of $25 per day for each day the notification is delayed. This can lead to a minimum penalty of $100 and a maximum penalty of $2,500.
A non-resident selling Canadian property must also file a Canadian tax return for the year of disposition. They can deduct the adjusted cost basis of the property and receive credit for any expenses incurred during the sale of the property.
The regulations put in place by the CRA are there to ensure non-residents don’t simply take the money and run. A non-resident selling property in Canada is required to pay their taxes on the sale of a property just like Canadian residents.
The process of selling a property for a non-resident owner can be complex. Several forms and documents must be submitted before a transaction can go through. Hence, seeking professional advice before selling is always a good idea. The CRA is very vigilant regarding property sales by non-residents because they want to ensure the deal is secure and that 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.
It is a misconception that the selling process differs for residents and non-residents. The process is the same – the only difference is that the non-Canadian resident may not be physically present in Canada. Even then, all financial and legal requirements must be fulfilled by the non-resident owner. Non-Canadian resident owners need to pay attention to tax filing deadlines. Missing these deadlines can result in unnecessary penalties and missed opportunities to minimize taxes.
Is the process for a non-resident selling property in Canada a complicated one? Most definitely. In addition to that, due to the housing crisis in Canada, all levels of government have recently taken different measures to discourage non-resident ownership of property in Canada. Changes in tax laws, such as the Underused Housing Tax or Prohibition on the Purchase of Residential Property by Non-Canadians Act, are two examples of these measures.
However, with the right real estate agent, tax advice, ample time for preparation, and timely submission of all documents and taxes, non-resident homeowners can successfully and efficiently buy and sell property in Canada.
**This article is not intended as legal or accounting advice. We recommend obtaining the guidance of a qualified accountant or real estate lawyer when selling property in Canada as a non-resident.
