FINANCING A PURCHASE
Non-resident clients are typically required to have a minimum 20% cash down payment. Top Canadian lenders generally provide financing for USA residents but not other foreign buyers. Smaller lenders do sometimes provide financing for other nationalities, usually at higher-than-average interest rates. Often, foreign buyers are better suited to seek financing options in their home country and pay cash for their Canadian property purchase.
PROPERTY TRANSFER TAX
When buying a property in BC, foreign buyers pay the same property transfer tax (PTT) as Canadian residents at the time of purchase. PTT is calculated at 1% on the first $200K, 2% on the portion of the fair market value greater than $200K and up to and including $2m, 3% on the portion of the fair market value greater than $2m, and if the property is residential, a further 2% on the portion of the fair market value greater than $3m.
It’s sometimes difficult for non-residents to obtain insurance for an investment property. Given that proof of home insurance is required to obtain a mortgage, this is an important factor to consider.
NO FOREIGN BUYER TAX
SELLING YOUR PROPERTY: CAPITAL GAINS TAX
When you sell your home, you may realise a capital gain. If the property was solely your principal residence for every year you owned it, you do not have to pay tax on the gain. If at any time during the period you owned the property, it was not your principal residence, or solely your principal residence, you may have to report all or part of the capital gain. As a non-resident of Canada, you’ll be required to pay a ‘withholding tax’ (calculated at 25% (on the land portion) and up to 50% (on the building portion) of the interim gain on the sale that the CRA (Canada Revenue Agency) will hold onto until the end of the tax year. They then deduct your tax owing from this amount and if the total tax owing is less than the withholding tax, you’ll be entitled to a refund for the difference. Your tax accountant can help to determine exactly how the Capital Gains tax applies to your situation.
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