Due to the current strength of the U.S. dollar and other economic conditions outside of Canada, many Americans, immigrants, and foreign investors are considering buying investment property in Canada. I strive to make the investing process simple for investors from every walk of life. As such, if you are wondering how to buy real estate investment property in Canada as a non-resident, there are a few important factors to consider before purchasing an investment property in Canada.
Canadian Mortgages
There is a maximum mortgage amortization of 30 years in Canada. As a non-resident however, banks and lenders can offer various terms that allow you to take advantage of the changing interest rate environment. These options allow for both flexibility and savings.
Your personal Real Estate Advisor will discuss these options with you and recommend the most appropriate mortgage terms to suit your needs and help avoid penalties due to early payout of the mortgage. I am here, with my network, to assist you in coordinating all the necessary financing and bank accounts needed in Canada for your investment property purchase. You will be kept fully informed of changes, updates, and the status of your assets through regular statements from your financial institution and property manager.
Tax Implications
If you are a non-resident of Canada purchasing Canadian revenue-producing properties, you will be required to pay tax in Canada for the income you earn from your Canadian investment property. Specifically, non-residents will be taxed 25% of the gross rent a tenant pays.
However, when you use a professional property manager, you are afforded some valuable options:
- The property manager will, by law, withhold 25 percent of the gross rental revenue at source to be remitted to the Canadian Revenue Agency. Then, on or before March 31 of the following year, the property manager issues you an NR4 form which gives you the right to file a Canadian Tax Return. The tax return is due June 30 and enables you to claim expenses against that income and potentially request a tax refund.
- You may elect to sign and submit an NR6 form in conjunction with the property manager before December 31 of each year. Once accepted, the amount of non-resident tax withheld decreases to 25 percent of the gross rental revenue less any allowable expenses.
Important Notes
- By signing an NR6 form, you are undertaking to file an annual Canadian Tax Return and a T776 Statement of Real Estate Rentals form.
- Many countries, such as the U.S., have tax treaties with Canada that prevent you from being taxed in both Canada and your home country. Be sure to contact a tax accountant in your country for more information.
- Verifying the residency of the person selling a property is critical since as a non-resident you may be responsible for any unpaid taxes related to the property, including Canadian property taxes and sales taxes.
- For the first year of ownership, the property manager is required to withhold 25 percent of the gross rental revenue until such time as the NR6 form can be filed with the Canadian Revenue Service at the end of the year.
- The tax year corresponds to the calendar year for individuals, while the tax year for corporations, estates and trusts is the fiscal year-end.
- Both of the above options require an NR4 Summary and NR4 Supplementary to be filed by the property manager on or before March 31, even if no tax was required to be withheld.
- You should always consult an accountant regarding your specific situation. I can refer you to accountants that can assist with cross-border real estate ownership.
For more information on the tax implications of purchasing Canadian investment property as a non-resident, visit the links below or contact one of our real estate advisors to be put in touch with a trusted Canadian accountant.
Quick Links to the Canadian Revenue Agency and Related Forms
Canadian Revenue Agency (very helpful for information about the tax implications of owning revenue producing real estate in Canada)
