FAQ – “I just took a listing and the owner lives outside of Canada. Is there anything I need to do differently?”
In this video Steve Jamieson, Managing Broker of RE/MAX Crest Realty Westside, explains one of the main things to do differently if your seller is a non-resident of Canada.
Here’s a brief summary:
Advise your seller to talk to a tax professional ASAP
- Canada Revenue Agency (CRA) must determine if there is capital gains tax due on the sale transaction, and / or other taxes due by the seller.
- A portion of the sale proceeds must be held back by the buyer until the seller can provide a Certificate of Compliance to the buyer via their respective conveyancing lawyers or notaries.
- The process to obtain a Certificate of Compliance from the Canada Revenue Agency (CRA) usually takes six to eight weeks. It can take longer.
- While the certificate can be applied for in advance of the closing, there must be a pending sale on the property, with all subjects removed. Make sure you give enough time between subject removal and closing.
- If the certificate is not obtained by the closing date, then the holdback funds will remain in a lawyer’s/notary’s trust account. This can be 25% or 50% of the selling price depending on the use of the property.
- Once the certificate is obtained, the taxes are paid from the holdback and the seller will receive any amount left over.
- Complications can arise if the seller does not have enough funds to complete the transaction once taxes have been calculated and the mortgage paid out.
If you are representing a buyer, always determine the residence status of the seller for taxation purposes and ensure the checkbox is marked on the Contract of Purchase and Sale. If you have determined that the seller is a non-resident, ask the listing agent if their client is on track to obtain a Certificate of Compliance by completion.
Non-resident for tax purposes
Here we are talking about a non-resident for tax purposes, which can be different to residency status for immigration purposes. It can be a grey area, and determined by matters such as number of days in the year physically present in Canada, residential ties, etc. In some circumstances, your client may need to apply to CRA for a determination of their status. Tax laws change from time to time, so refer your client to a tax expert and cra.gc.ca for more information.
There is a different procedure to identify a client who is not physically present (non-face-to-face). The procedure is not covered in this tutorial.
Please note: The Frequently Asked Question video series is used for training purposes within our group of RE/MAX offices. If you are licensed at a different brokerage, you must refer to your own Managing Broker for advice.