Real Estate -> Buying real estate from a non-resident
Buying Real Estate From a Non-Resident
Income Tax Act s. 116
When real estate is purchased from a non-resident of Canada, the non-resident is normally required to complete and submit a form to Canada Revenue Agency (CRA), along with a tax of 25% of the gain on the property. CRA will then provide a certificate of compliance (T2064 or T2068) to the purchaser and the vendor.
Purchaser Liable if Non-Resident Does Not Pay
If the non-resident vendor does not pay this tax, the purchaser of the property will be liable. Thus, the purchaser may withhold 25% (50% in some cases) of the cost of the property.
In a recent BC Supreme Court Case, Mao v. Liu, 2017 BCSC 226, Tony Liu Notary Corporation was sued by Mao. Mao had been assessed $600,000 by CRA related to the sale, because the seller was a non-resident of Canada. The Notary had handled the closing of the sale and failed to discover that the seller was a non-resident. Thus, the 25% tax was not remitted by the vendors. The Court found in favour of Mao.
Several factors made it seem, without doing sufficient investigation, that the vendors were residents of Canada:
When you're buying real estate, or are the agent for the purchaser, get verification that will stand up in Court that the vendor is a resident in Canada, unless it is already known that the vendor is a non-resident.
Canada Revenue Agency Resources
The above tax applies to some other types of Canadian property besides real estate. For more information on this topic, see Canada Revenue Agency resources:
T4058 Non-Residents and Income Tax
Non-residents disposing of certain Canadian properties
IC72-17R6 Procedures Concerning the Disposition of Taxable Canadian Property by Non-Residents of Canada - Section 116
Purchasing Residential Real Estate in BC
If you're planning to purchase residential real estate in BC, see these articles as well:
BC Speculation and Vacancy Tax
If you're planning to purchase property in BC on which you plan to develop a farm, see:
Farm Status in British Columbia - Understanding the Regulation
Know the tax implications when buying from a non-resident.
Make sure you know whether the vendor is or is not a non-resident!
Revised: October 20, 2021
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