Selling Property in Canada as a Non-Resident
What you need to know about withholding tax
Selling any property can be stressful, lining up all of the paperwork, finances, etc. When the seller is a non-resident of Canada, there are even more things to consider. Beyond negotiating a good price, there are specific filing requirements a non-resident must undergo. You’ll want to ensure that you have an experienced Real Estate professional on your side – one who is well-versed in handling transactions with non-residents of Canada.
First of all, a non-resident is subject to a withholding tax, which is generally 25% of the sale price.
One implication of this withholding tax you must be aware of, is the seller’s ability to complete knowing that 25% of the sale price may not be readily available to them on completion.
Consider this example of a transaction:
Sale Price $500,000
Commission $ 17,000
In most cases, the Seller’s ability to clear title would be simple. But, in the case of the Seller being a non-resident, $125,000 will be held back - leaving only $375,000 to pay your fee and mortgage balance! Obviously, the math doesn’t work in this scenario.
To reduce or eliminate the holdback, a Clearance Certificate must be acquired. This must be filed within 10 days of the sale closing. Once this has been issued, the notary will only be required to withhold the amount needed to satisfy any taxes owing. To accelerate the process, it’s advised that you place the entirety of the CPS in the hands of the Seller’s tax advisor and ask that they file for the ‘Clearance Certificate’. However, it should be noted that this does not address how much tax is payable.
You can see the importance of having a qualified, experienced professional on hand to help you navigate through the process – helping you save time, money, and any costly issues with legalities.
Be sure to reach out with your questions. Put our experience working with non-residents of Canada to work for you and the sale of your property!