Vancouver Skyline by Rob Holland
Many Canadian cities, including Vancouver and Toronto, are rated among the most desirable places to live in the entire world based on criteria such as healthcare, public transportation, green spaces, education, and diversity. Because of this, there is no doubt that real estate in Canada draws a lot of attention from the outside as well as from within the country, and purchasing a Canadian property from abroad can make a lot of sense from an investment point of view.
Thanks to the affordable direct airfares offered by such online discounters as FlightNetwork, prospective immigrants, often lured to the friendly Canadian shores by skyrocketing property prices in the UK and Europe, find it very easy to travel here to get a feel for real estate opportunities. Many immigrants are pleased to find that Canadian law does not impose any restrictions or limits on the amount of property they are able to buy.* So once they have picked their favourite city where they want to settle, visited different neighbourhoods, and reviewed properties in person, they are free to buy any number of properties.
Non-resident Canadian Real Estate Buyers
It’s important to note that the following information only applies to non-residents of Canada. Who is a non-resident of Canada? It’s usually someone who normally lives outside of Canada, spends fewer than 183 days in Canada a year, or is not deemed under the Income Tax Act to be a resident. Therefore it is important to note that residency does not necessarily have anything to do with citizenship and that if you’re a Canadian citizen but you spend less than 183 days in Canada a year, you can easily be regarded as a non-resident.
British Columbia does not require that a purchaser of a property be a resident or citizen of Canada, but to be able to occupy residential premises, the non-resident has to comply with immigration requirements, which vary considerably depending upon the nationality of the individual involved. Feel free to contact your Canadian Consulate about any residency issues that may apply.
Vancouver Airport by Matthew Grapengieser
Canadian law recognizes many classes of immigrants under which a person can apply for permanent residence. These classes are: skilled worker (a person who qualified under a point system based on their benefit to Canada and its economy, work experience, and education), business class, or family class (a direct family member of Canadian citizen or permanent resident). There is also a significant added bonus when seeking full immigration status (as opposed to visitor status) because in this case, a purchase of a home displays a sincere connection to Canada and the property is ultimately considered a part of your overall net worth.
Lending for Real Estate for Foreign Buyers
Usually there is no need to bring a whole suitcase of cash with you because local lenders such as chartered banks and credit unions will be able to finance your subject of purchase to credit approval. However, if you do not work in Canada, financial institutions may require a cash down payment of at least 25 per cent. Depending on the location where you want to move, you may need to provide a letter of introduction from your banking facility in your own home country, and also, your previous income in the home country will be verified. To get more information on how to begin a partnership with a Canadian financial institution, we recommend visiting the Citizenship & Immigration website.
It’s also important to mention that any lending institution in British Columbia will require insurance for the property you’re going to buy. Both “Fire Insurance” and “Title Insurance” are required. The survey that shows whether there are any issues with the location of the building affecting the title costs from $300 to $500, but many banks are willing to accept an existing survey if it’s not too old.
Foreign Investors in Canadian Real Estate
New Home by Pnwra
If you will be purchasing a commercial property or a brand new home (rather than a resale home), GST registration may be required.
Any investor who is buying Canadian property exclusively for an investment purpose and who has no plans to live in this property but hopes to sell it in the future for a substantial financial gain would be wise to contact an experienced accountant about all the issues that may be related.
Furthermore, every individual municipality levies an annual property tax, the value of which is set as of July 1st every year and is meant to represent current market value as of that date. If citizens think that their assessment is too high, they may appeal, and municipalities then determine the rate of property tax to be levied based on this assessed value.
In addition, non-resident sellers should be informed about the following tax obligations:
- Non-residents are required to have 25 per cent of the gross rental income of the property paid and remitted monthly to the Receiver General for Canada within fifteen days of each month-end, either by the tenant or it is possible for the non-resident to elect a property manager who will then become responsible for filing the Canadian income tax returns and is exempt from the withholding requirements. Any failure to pay this tax and to file a tax return can result in hard penalties.
- A purchaser of a property from a non-resident is required by the Income Tax Act to withhold a certain portion of purchase amount and to remit it to the Canada Revenue Agency within 30 days of the end of the month in which the purchase occurred. The amount in question is set at half of the gross purchase price in the case of depreciable property, and if the property is non-depreciable then the amount is one quarter of the gross purchase price.
- Many significant complications can occur if you earn any income for the property in British Columbia (e.g. through a capital gain when you sell a property or rents during the period that you own the property). There may also be tax implications when a non-resident owner of a property dies or when one transfers a property to his or her relative or company although there was no money in question. It’s therefore recommended you check with the Canada Customs and Revenue Agency and your own taxation authorities.