There are several reasons why a business may choose to outsource their entire or portions of their accounting and Tax functions
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Selling real estate in Canada as a non-resident can be a bit more complicated than selling property as a resident. Here’s what non-residents need to know about selling real estate in Canada. Capital Gains Tax Non-residents who sell Canadian real estate are generally subject to Canadian capital gains tax. The capital gains tax is calculated based on the difference between the sale price and the adjusted cost base of the property. The adjusted cost base is the original purchase price, plus any eligible expenses, such as legal fees and property taxes paid. Non-residents are required to pay 25% of the capital gains tax they owe to the Canada Revenue Agency (CRA) within 30 days of the sale. If the non-resident fails to pay this amount, the CRA can hold the purchaser of the property liable for the payment. It’s important to note that non-residents may be eligible for certain tax exemptions or credits, depending on their situation. For example, if the property was a principal residence, the non-resident may be eligible for a partial or full exemption from capital gains tax. Withholding Tax When a non-resident sells Canadian real estate, the purchaser is required to withhold and remit 25% of the gross sale price to the CRA. The withholding tax is intended to ensure that non-residents pay the capital gains tax they owe. However, the withholding tax can be reduced significantly if the non-resident applies for a certificate of compliance from the CRA. A certificate of compliance will reduce the withholding tax from 25% of gross proceeds to 25% of Gain. Let’s take an example of a property purchased for $600K sold at a price of $1M. In absence of a compliance certificate, $250K will need to withheld at time of sale and remitted to CRA. Obtaining a Compliance Certificate will reduce this amount to $100K. If you are disposing real estate, you need to allow sufficient time to obtain the certificate of compliance as it would need to issued prior to closing date. Professional Assistance Given the complexity of the Canadian tax system, non-residents selling real estate in Canada are encouraged to seek professional assistance. A tax professional can help determine the non-resident’s tax obligations, assist with applying for a certificate of compliance, and ensure that the non-resident is in compliance with Canadian tax laws. In conclusion, non-residents who sell real estate in Canada are subject to Canadian capital gains tax and withholding tax. They may be eligible for certain tax exemptions or credits, and can apply for a certificate of compliance to reduce the withholding tax. Seeking the assistance of a tax professional can help ensure that the process goes smoothly and that the non-resident complies with Canadian tax laws.
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As a non-resident of Canada, you may be required to pay taxes on income earned in Canada or on Canadian assets you own. Here’s a brief overview of non-resident tax in Canada. Who is a non-resident for tax purposes? For tax purposes, a non-resident of Canada is someone who either: Doesn’t have significant residential ties in Canada (such as a home, spouse or dependents), or Doesn’t stay in Canada for more than 183 days in a year. If you’re a non-resident, you’re generally only taxed on Canadian-source income, such as employment income, rental income, or investment income earned in Canada. You may also be subject to withholding tax on payments made to you by Canadian businesses, such as dividends or royalties. What are the tax rates for non-residents? The tax rates for non-residents are generally higher than for Canadian residents. For example, non-residents pay a 25% withholding tax on dividends from Canadian corporations, while residents pay a lower rate based on their marginal tax bracket. Non-residents are also subject to a flat rate of 25% on certain types of rental income, such as rent from real property in Canada, and on certain types of employment income, such as income from performing in Canada. How do non-residents file their taxes? Non-residents must file a Canadian income tax return if they earned Canadian-source income or disposed of taxable Canadian property during the year. The tax return is due on June 30 of the following year, but any tax owing is due on the date of filing. Non-residents can use Form NR4 to report income that is subject to withholding tax, such as dividends, interest, or rental income. They can use Form T1159 to calculate their tax owing and report other types of income, such as employment income or capital gains. It’s important for non-residents to ensure they comply with Canadian tax laws to avoid penalties and interest charges. Consider seeking the advice of a tax professional if you’re unsure about your tax obligations as a non-resident in Canada. Contact ASA for a Free Consultation.
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