October 17, 2014
The Greater Toronto Area (GTA) is projected to be the fastest growing region of the province of Ontario, with its population increasing by 2.5 million, or 39.1 per cent, to reach over 8.9 million by 2036 (currently it is at 5.5 million). The GTA’s share of provincial population is projected to rise from 47.6 per cent in 2012 to 51.5 per cent in 2036. When investing in real estate, the first three rules are Location, Location and Location. Toronto, being the Commercial, Distribution, Financial and Industrial centre of Canada, continues to experience a demand for housing that outpaces supply.
For the latest information on Toronto’s Real Estate Market please email me at info@PeterPowers.ca
Non-Residents of Canada (a Canadian Citizen who resides in Canada for less than a total of 183 days in the year is also considered a non-resident) have no restrictions on the type of real estate or the amount of real estate that they buy in Canada.
It is possible to acquire conventional financing from major Canadian financial institutions. However, unless you are putting down 50% of the purchase price, you may be required to provide income verification and/or a letter of introduction from your banking institution to verify your credit worthiness and your ability to pay the mortgage. In certain situations a non-resident can get financed with as little as 25% cash on the value of the purchased property. The interest rate may be slightly higher than what a Canadian resident would be quoted for an identical purchase but would not have a detrimental effect on the overall financial return calculations.
As far as taxes are concerned, it is important to have an accountant that is knowledgeable in the tax implications for non-resident ownership. Foreign owners pay the same land transfer tax (LTTX) as Canadian residents when purchasing (there are deductions to the LTTX that could be utilized if the non-resident is a first time home buyer who plans to use the property as their principal residence within nine months of completing the purchase) but their tax obligations differ during ownership and upon selling. As with all revenue agencies, the Canada Revenue Agency (CRA) has rules that need to be complied with and forms that need to be processed or stiff penalties could result.
Ø Non-residents are required to withhold and remit 25% of the gross monthly rental income to the CRA within 15 days of the end of each month. This can be done by the tenant but it is better to choose a Canadian representative to do so for you.
Ø Non-residents, within 10 days of completing the sale of their Canadian property, must file a sale notice to the Canadian government and obtain a Certificate of Compliance that shows that the CRA has received a prepayment of the taxes owing or an appropriate security for the prepayment.
Ø Non-residents who have sold a property in Canada can, in the year following the completed sale, file a tax return for the purpose of realizing a refund for a portion of their expenses (improvements to the property, legal fees, survey/appraisal fees, Realtor fees).
CRA has a website that can answer questions pertaining to tax issues for nonresident property owners. http://www.cra-arc.gc.ca/E/pub/tp/ic72-17r6/ic72-17r6-11e.pdf
It is important to align yourself with a Real Estate Broker that is experienced and knowledgable in the issues that non-residents face when investing in Canada.
I look forward to helping you make the right decisions.
Real Estate Broker, Mortgage Agent
Royal LePage/ Johnston and Daniel Division, Brokerage