Real Estate Implications for Non-Residents
Knowing the implications of being a non-resident on your real estate transaction is NOT common knowledge. Legislature surrounding this has recently changed and it’s a good idea to brush up!
Who is considered a non-resident?
People are generally pretty shocked when I explain whose considered a non-resident. No one assumes a Canadian citizen snow bird heading south can be a non-resident!
For purposes of real estate and the non-resident seller’s tax, we are concerned with individuals the CRA considered a non-resident for their tax purposes.
The definition is broader than most people assume. If you’re unsure if you’re a resident or non-resident contact the CRA for clarification. This is SO IMPORTANT to know before selling (or buying).
Making inquiries and fulfilling requirements could take weeks or months… so get a head start!
You’re considered a non-resident if you:
- normally, customarily or routinely live in another country and are not a resident of Canada
- do not have significant residential ties in Canada
- live outside Canada throughout the tax year
- stay in Canada for less than 183 days in the tax year
Non-residents ARE NOT only individuals who are not citizens. They are in fact Canadian citizens who fall into these categories. Snow birds or others who live abroad for large periods of time are often considered non-residents.
Non-Resident Seller's Tax
This tax applies to non-resident sellers upon the sale of real estate property.
It is not the same as the 15% Non-Resident Speculation Tax (NRST) that was passed some time ago for Ontario and British Columbia.
If you want to brush up on the NRST I’ve included a button to resources about that tax below.
CRA Rules & Implications
If a seller is a non-resident of Canada for tax purposes, they are required to get in contact with the CRA. They must inform them of the sale or proposed sale of property and pay applicable taxes.
Items To Address With The CRA
- Taxation Number
– if you don’t already have one, contact the CRA for yours
– upon the disposition or acquiring of certain Canadian property
*if a property has been sold a non-resident has 10 days to let the CRA know
– must send applicable notification forms to the Centre of Expertise (CoE)
– if you don’t pay the applicable taxes within the 10 day period after the sale of a property you’re liable for a penalty of $25/day up to $2500
– this is in addition to the tax owed and will not be deducted
Certificate of Compliance
This certificate will be issued once all requirements are met.
Form T2064 or T2068.
Implications for Resident Buyers
PAY ATTENTION CANADIAN RESDIENTS.
There are serious implications and tax liabilities as a RESIDENT buyer if the seller of the property you’re purchasing is a non-resident.
As A Buyer You Should:
- confirm the seller’s status
- have your lawyer request a Statutory Declaration of Residency
- be satisfied with the answers provided
- withhold 25% of proceeds to avoid buyer liability (as per the CRA)
Note: The Agreement of Purchase and Sale used by most Realtors has a provision that protects you. As your Realtor to see this and explain what it means before offering.
When buying and selling our first thoughts usually go to the property itself. We don’t like spending too much time on the nitty gritty because they just frankly aren’t fun.
It’s even less fun when the CRA hits you with taxes owing and possible penalties. Buying and selling is MOSTLY fun with a bit of homework and research on the side.
If you have any questions I’m always here to help!
Lara Stasiw • Real Estate Agent & Home Design Connoisseur
You made it to the end! THANK YOU!!
If you’re not exceptionally bored by my run-on sentences and bad humour, keep reading!
My other blogs cover topics on Real Estate, Home Design and Decor, as well as the C0mmunity.
For updates on new Blogs, Home Improvement Tips, A Community Spotlight and Real Estate FAQ’s, sign up for my Newsletter! I only send it out once a month.
(Naturally, there is a market update too!)