MGD IMMOBILIER

PURCHASE OF REAL ESTATE IN CANADA

Who can buy real estate in Canada?

Canada welcomes buyers from all over the world and there are no restrictions on the types of properties people can buy.

What is a non-resident?

Lenders define a non-resident as someone who does not earn income here and who does not file tax in Canada.

Amount of personal contribution for a non-resident

Canada welcomes buyers from all over the world and there are no restrictions on the types of properties people can buy.

US residents

If you live in the United States, plan to use the property rather than renting it, and can provide proof of income and down payment, your down payment must be at least 20% of the total purchase price.

Other non-residents

If you live outside of Canada or the United States and can provide proof of income and down payment, your down payment must be at least 35% of the purchase price. In addition, your deposit cannot be a gift from another person or entity.

Documents needed for a mortgage loan for a non-resident in Canada ?

  • Proof of income (letter of employment, pay stubs and tax returns)
  • Proof of down payment (bank statements from the last 90 days)
  • Reference letter from a bank outside of Canada
  • Report from an international credit bureau or bank statements for the past six months

Interest rates and mortgage conditions for non-residents

In most cases, provided they meet the mortgage eligibility criteria, non-residents can access the same mortgage products that are available to residents of Canada..

Some restrictions :

  • Some lenders may charge a rate premium for non-residents
  • Non-residents cannot have an amortization period of more than 25 years
  • Non-residents cannot get a home equity line of credit
  • Non-residents cannot refinance

Physical presence during the process

Usually, non-residents will need to be in Canada at least twice to complete the process of financing and buying a property.

The buyer will need to travel to Canada to open a Canadian bank account. (Note that there are exceptions to this rule. For example, some of our customers have found that as HSBC Premier customers they have been able to open accounts in Canada from their home country.)

 

The non-resident buyer must then be present at the closing, because there is no proxy options for closing.

Will lenders treat rental income as part of a non-resident's income?

Lenders will not allow applicants to include rental income in their income to qualify.

Additional taxes for non-residents pay when buying real estate in Canada

Non-residents are subject to the same land transfer tax as Canadian residents when purchasing property here. Those who buy residential property in or near Toronto will have to pay the Non-Ontario Resident Speculation Tax, which is 15% of the purchase price.

List of regions in Ontario subject to the non-resident speculation tax.

  • City of Barrie
  • County of Brant
  • City of Brantford
  • County of Dufferin
  • Regional Municipality of Durham
  • City of Guelph
  • Haldimand County
  • Regional Municipality of Halton
  • City of Hamilton
  • City of Kawartha Lakes
  • Regional Municipality of Niagara
  • County of Northumberland
  • City of Orillia
  • Regional Municipality of Peel
  • City of Peterborough
  • County of Peterborough
  • County of Simcoe
  • City of Toronto
  • Regional Municipality of Waterloo
  • County of Wellington, and
  • Regional Municipality of York.

Want to know more ?

Buying a house in another country can seem like a challenge. MGD is happy to support you throughout the process. We work with licensed mortgage brokers and lawyers to make your purchase plan a reality.

RENTAL INCOME TAX

When you receive rental income from real or immovable property in Canada, the payer, such as the tenant, or the agent, such as the property manager, must withhold non-resident tax at the rate of 25% on the income of gross rental paid or credited to you. The payer must pay the tax no later than the 15th of the month following the month in which the rental income is paid or credited to you.

The payer must give you two copies of an NR4 slip, Statement of Amounts Paid or Credited to Non-Residents of Canada showing the gross amount of rental income that was paid or credited to you during the year and the amount the non-resident tax withheld. The payer must also send the CRA an NR4 information return, as explained in Guide T4061, NR4 – Non-Resident Tax Withholding, Remitting, and Reporting.

In general, non-resident tax withheld is considered your final tax liability to Canada on rental income. However, if you make the election under section 216 of the Income Tax Act, you choose to report your rental income from real or immovable property in Canada on a separate Canadian income tax return. This allows you to pay tax on your net Canadian source rental income instead of the gross amount and you can pay less tax. You may also receive a refund of all or part of the non-resident tax withheld. For more information, see Guide T4144, Income Tax Guide for Electing Under Section 216.

If you intend to make a section 216 election, you may want to consider another way to have non-resident tax withheld from your rental income. You can choose to withhold tax on your net rental income rather than the gross amount. To do this, you and your agent (a resident of Canada who is acting on your behalf with respect to your rental income in Canada) must complete Form NR6, Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent. real or immovable property or Receive a forest royalty and send it to the ARC for approval. You must send the NR6 form to the CRA by January 1 of each year, or before the first rent payment is due.

Once the CRA approves your Form NR6, your agent can withhold non-resident tax at the rate of 25% on your net rental income (the amount of rental income available after payment of rental fees) . Your agent must pay the tax to the CRA by the 15th day of the month following the month in which the rental income is paid or credited to you. For more information, see Guide T4144, Income Tax Guide for Electing Under Section 216.

Generally, you must send your section 216 return to the CRA within two years of the end of the year in which the rental income was paid or credited to you. If the CRA approves your Form NR6 for a given year, you have to file a T1159, Income Tax Return for Election Under Section 216, for that year, even if you have no tax payable or you do not wait for a refund. The return is due no later than June 30 of the following year. If you have rental income from more than one rental property in Canada and you make an election under section 216, all of your rental income and expenses in Canada must be reported together in one return under section 216. For more information on the section 216 return filing due date, see Guide T4144, Section 216 Income Tax Guide.

Generally, you must send your section 216 return to the CRA within two years of the end of the year in which the rental income was paid or credited to you. If the CRA approves your Form NR6 for a given year, you have to file a T1159, Income Tax Return for Election Under Section 216, for that year, even if you have no tax payable or you do not wait for a refund. The return is due no later than June 30 of the following year. If you have rental income from more than one rental property in Canada and you make an election under section 216, all of your rental income and expenses in Canada must be reported together in one return under section 216. For more information on the section 216 return filing due date, see Guide T4144, Section 216 Income Tax Guide.

What is the section 216 option?

As a non-resident of Canada, you can choose to send the CRA a separate Canadian income tax return to report your rental income from real or immovable property in Canada. The election to send this return to the CRA is called an election under section 216 of the Income Tax Act..

 

The T1159, Section 216 Election Income Tax Return is separate from any other return you have to send to the CRA for the year.

 

Do you have more than one Canadian rental property?

If you have rental income from more than one rental property in Canada and you make an election under section 216, all of your rental income and expenses in Canada must be reported together on a return under article 216.

Exemple

Philip a émigré du Canada en 2017 et est devenu un résident du Venezuela. Il n’a pas vendu sa maison en quittant le Canada et a décidé de la louer pendant quelques années. En 2019, son gestionnaire immobilier au Canada a retenu et remis à l’ARC un impôt des non-résidents de 3000 $ (25% du revenu de location brut de 12000 $).

Philip avait les revenus et dépenses suivants de la propriété en 2019 :

Revenus locatifs bruts :12 000 $

Moins les dépenses admissibles :- 6 000 $

Moins la déduction pour amortissement :- 1 000 $

Égal aux revenus locatifs nets :5 000 $

Pour récupérer tout ou partie de l’impôt des non-résidents retenu, Philip peut choisir de produire une déclaration en vertu de l’article 216.

 

S’il le fait, il déclarera et ne paiera de l’impôt que sur le revenu net de location de 5 000 $. Dans la déclaration, il demandera également l’impôt des non-résidents de 3 000 $ à la ligne 43700 (que son gestionnaire immobilier avait retenu et remis à l’ARC) pour compenser l’impôt à payer.

 

Philip recevra un remboursement de l’excédent d’impôt retenu, pourvu qu’il envoie à l’ARC sa déclaration de 2019 en vertu de l’article 216 d’ici le 31 décembre 2021.

What is the benefit of the section 216 option?

The section 216 election allows you to pay tax on your net Canadian source rental income rather than on the gross amount. If the non-resident tax withheld by the payer is more than the amount of tax payable, calculated on your section 216 return, the CRA will refund the excess to you.

 

When is your section 216 return due ?

Generally, you must send your section 216 return to the CRA within two years of the end of the year in which the rental income was paid or credited to you. For exceptions, see When is your 2019 section 216 return due?

 

What if you send the return late ?

If you do not send your section 216 return to the CRA by the due date, your election is invalid. If the payer has not withheld the correct amount of non-resident tax from your rental income, the CRA will issue you a non-resident tax assessment.

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