International Buyers
In British Columbia foreign buyers are generally treated on an equal footing with local buyers in that there are no general restrictions on the purchase and sale of real estate by non-residents. However, they need to be familiar with the following requirements and we recommend if you are purchasing real estate as a non resident of Canada that you consult with a lawyer or accountant with experience in this area.
Property Purchase Tax
All purchases of real estate in British Columbia are subject to a Property Purchase Tax payable at the time of purchase equal to 1 percent of the first $200,000 of value and 2 percent on any portion over $200,000. For example, the tax payable on a purchase of $500,000 would be $8,000. Unlike British Columbia residents foreign buyers are not entitled to the First Time Buyers exemption and the full tax is payable even if they are first time buyers.
Income Tax Act
Foreigners (i.e. non- residents under the Income Tax Act at the time of sale) should be aware that on sale of a rental, vacation or commercial property capital gains tax is payable. Until a special clearance certificate is obtained from the Canada Revenue Agency ("CCRA") the selling lawyer or notary must withhold 25 percent of the gross sale proceeds. If time permits this clearance certificate can be obtained before completion but it is normally received after closing. Once a certificate is obtained then 25 percent of the gain portion only (gross proceeds less original cost) is remitted to CCRA and the balance of the funds heldback may be released to the seller. The non-resident seller then must file a Canadian Tax Return in the year of sale reporting the gain and paying tax on 50 percent of the gain at the graduated tax rates. By illustration a $200,000 capital gain taxed at the highest marginal rate of 43.5 percent would result in approx $43,500 in tax payable. In the return, allowance is made for the deduction from the proceed of sale of closing expenses such as commission and legal fees and thus after filing, a return a refund of funds initially paid on account of tax is often returned to the seller.
Withholding on Rental Income
You should also be aware that any rental or other income received from the property as a non- resident is also subject to a withholding tax of 25 percent on the gross amount. It is possible to receive in advance from the CCRA approval to reduce the amount withheld on an ongoing basis based on an estimate of expenses. While this reduces the amount of withholding tax required you will then be required to file an annual tax return and pay income tax on the net income from the property at the graduated rates.
Goods and Services Tax
The purchase of a brand new home, as distinct from a resale home, is subject to the federal GST. This tax stands at 5% although a partial rebate is normally granted if the buyer plans to use it as a principal residence. The REALTOR with whom you deal will be able to tell you more about this if it applies. You need to contact the Canada Customs and Revenue Agency for further clarification.
Mortgage Financing
Financing can be arranged through conventional lenders and mortgage brokers. Traditionally, a 35% down payment is required; however, a 10% down payment is sufficient in special circumstances. It is best to consult with a mortgage broker to understand what your qualification is before you begin your property search. Learn more »
Working with Realtors
All Realtors that are licensed by and members of the GVREB can show any property listed for sale through the Greater Vancouver Real Estate Board's (GVREB) Multiple Listing Service (MLS) at any time; therefore, it is adisable that you carefully choose one Realtor as your "Buyer's Agent" to provide this service to avoid a conflict of interest that could impair your negotiations and legal position. Realtors are required to explain the laws of agency (the various types of working relationships that you can have with your Realtor) before you begin your property search. Learn more »
Useful Links and Resources
Do not hesitate to call or email me directly with any questions you may have. I would be honoured to represent your best interests in purchasing or selling real estate in British Columbia.
