Buying Properties from Non-Residents
Inside the Real Estate MarketUsually I talk about market statistics each week but this week I would like to talk about buying properties from non-residents. In the condo market, many owners and sellers of properties are foreigners but they fall into a class called non-residents. Canadian citizens, who don’t own any property in Canada and who work outside of Canada are also classified as non-residents. So what do you need to know?
Non-residents are subject to a 25% withholding tax on the profits when they sell a property. 25% is about the same amount as Canadians who pay Capital Gains Tax. So when these properties close, the Seller’s lawyer needs to provide a Tax Clearance Certificate to the Buyer. What happens if the Seller’s lawyer doesn’t have the certificate? Is there a delay in closing? No, what happens is the Buyer’s lawyer will pay the amount of money into trust to the Seller’s lawyer. The Seller’s lawyer will withhold an amount of money equal to the estimated tax and a little extra. The balance of the funds will be paid to the Seller and when that tax certificate comes through, the Seller gets the balance of the funds.