Selling of Real Estate by Non-Residents of Canada

Since I routinely deal with non-resident investors wanting to sell Canadian real estate assets, I’d like to shed some light on this somewhat obscure topic. Disclaimer: Please note that the following article is provided only for general information purposes, is not intended or purported to be legal advice, and may or may not apply to your particular situation and that I strongly recommend – in fact I urge you – to discuss this topic in the section Elsewhere with your attorney, notary, transfer agent, or accountant—not necessarily in this sequence—if there is a need.

If you are a non-resident engaged in the sale of Canadian real estate assets that you own, you should be aware of the applicable provisions of the Income Tax Act to avoid problems when it is time to complete the sale. In short, if taxes are owed to Revenue Canada by the property owner, the property can be charged to secure payment of the taxes owed. This applies to both residents and non-residents. However, what specifically applies in the case of selling Canadian real estate to a non-resident is that a fee may be charged on the property even after it is transferred to the new owner.

In order to be protected and in accordance with the requirements of the Income Tax Law, the buyer must make a “reasonable inquiry” about the seller’s residence status. Thus, the need to indicate “Canada resident/non-Canada resident” under seller information in the top left of the purchase and sale contract. The buyer’s notary or attorney will make a similar inquiry to the seller when signing the invitation documents. If the seller is not resident in Canada, he must apply for and obtain a clearance certificate from the Canadian Revenue Service and provide the buyer with this certificate. It usually takes four to six weeks for a Certificate of Clearance to be issued by the Canadian Revenue Service. If a Certificate of Clearance is not presented to the buyer or his carrier representative, the buyer must retain one-third of the sale price until the certificate is presented. Furthermore, if certification is not forthcoming, the pending funds are transferred to Revenue Canada and the buyer – and the newly acquired property – is protected from any other liability or charges.

Furthermore, a problem at the time of completion may arise if, for example, the current mortgage exceeds two-thirds of the sale price, and therefore there is not enough revenue to allow for suspension and clear ownership, let alone a closing payment. costs. Therefore, if you are (or will be at the time of completion) a non-resident seller, be sure to raise this issue before selling the property and still have time to obtain the required clearance certificate. Likewise, if you are the buyer and learn that the seller is a non-resident, make sure there is plenty of time before completion and acquisition.