Non-Residents Buying Real Estate in Canada
Canada has long been recognized as a top location for international real estate investment. However, the government has recently implemented laws to deter non-resident investors in an attempt to cool off the overheated housing market. If you are an overseas investor or planning to move to Canada, it is important to be familiar with these new rules. In this blog, I will discuss these new rules and some tax and financing considerations that affect non-residents buying real estate in Canada.
This is the last part of a 3-part blog series on non-residents buying, renting and selling real estate in Canada. (Did you miss parts 1 and 2? Read more here.)
What is the Ontario Non-Resident Speculation Tax (NRST)?
As a non-resident buying real estate in Canada, specifically in certain parts of Ontario, you may be subject to NRST:
- Effective April 21, 2017, a 15% tax is imposed on the purchase of residential property located in the Greater Golden Horseshoe Region.
- Applies to individuals who are not citizens of Canada or do not have permanent resident status, foreign corporations and taxable trustees.
- TIP: Canadian citizens are not subject to NRST, even if you do not live in Canada.
- TIP: Exemptions or rebates may be available in certain circumstances. For example, individuals who move to Canada and become a citizen or permanent resident within fours years may be eligible for a rebate.
- For more details, visit the Ontario Ministry of Finance’s website
A similar foreign buyer’s tax of 20% may apply to purchases in certain parts of British Columbia. For more details about the BC foreign buyer’s tax, visit the Government of BC’s website
What Tax Rates Will I Pay in Canada When I Sell the Property?
When an individual sells real estate, the gain calculated as the difference between the sales price and the original purchase price is taxable in Canada. This is true even if the seller is a non-resident.
The Canadian individual tax system is a progressive system, meaning that individuals who earn more are generally taxed at higher rates. Currently, the highest marginal tax rate for non-resident individuals is approximately 25% of the gain on the sale of real estate. However, you can reduce your taxes by preparing certain tax filings (which I wrote about here).
People often ask if they should invest personally or in a corporation. For a non-resident, the answer highly depends on which country you are resident in. Some countries have more beneficial tax treaties with Canada than others. Before you buy a property, it is important to obtain professional advice on how to choose a structure that minimize taxes.
Can I Qualify for a Mortgage as a Non-Resident?
YES, you can!
There are no rules that prevent non-residents from qualify for a mortgage in Canada. But, you will be subject to more stringent criteria. Non-residents may have to:
- Provide a larger down-payment (typically 35% or more)
- Provide additional documents to support their income
- Pay a higher mortgage interest rate
If you have specific questions about qualifying for a mortgage as a non-resident, you can reach out to Dominion Lending Centres.
Despite the recent law changes and complexities of investing overseas, Canada remains an ideal location for investors from around the world. If you are a non-resident looking to purchase real estate in Canada, please connect with us for a consultation.
The content of this blog is intended to provide a general guide to the subject matter. Professional advice should be sought about your specific circumstances.
