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Selling Canadian Real Estate by Non-Residents

Buyers
Sellers
Real Estate Professionals
David H. Korman
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October 4, 2018
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We often act as the lawyers for either the Buyer or the Seller of real estate owned in Canada by Non-Residents of Canada. As a Non-Resident of Canada, tax must be paid on income received from sources in Canada. The type of tax paid and the requirement to file an income tax return depend on the type of income received, therefore an accountant or other tax advisor should be consulted to deal with such taxes. However, the following outlines some of the issues that mustbe considered:

  • Non-Resident individuals and Non-Resident corporations who dispose of real property and are required to notify the Canada Revenue Agency (“CRA”) of the disposition must have a Canadian Taxation number, if an individual, or a business number, if a corporation.
  • The Non-Resident Seller must obtain a Certificate of Compliance (“Certificate”) from the CRA as the disposition of property is taxable. If the Certificate is not received prior to the closing date of a sale, then the Seller’s lawyer will usually undertake to hold back 25% of the sale price (50% on certain types of property) in trust until the Certificate is received from the CRA.
  • There is usually a few months turnaround time with the CRA once the application for the Certificate is received so the application for the Certificate should be submitted as soon as an agreement of purchase and sale is firm in order to avoid any delay in obtaining the Certificate.
  • What is surprising to many Buyers is that the tax liability falls to the Buyer (and thus the Buyer’s solicitor) to ensure the proper amount of the hold back, otherwise the Buyer can become liable to the CRA to pay the Seller’s taxes on the disposition.
  • As a result, the Buyer is entitled to withhold 25% (50% on certain types of property) of the proceeds until the Certificate is obtained. The terms of an undertaking will have to agreed upon between the Buyer’s lawyer and the Seller’s lawyer as to which of them will be holding back the necessary funds. The hold back funds will eventually be disbursed in accordance with the Certificate and the undertaking.
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David H. Korman
Managing Partner
dkorman@kormans.ca
About
David

David is a member of the Law Society of Ontario since his call to the bar in 1985. David has over 35 years of extensive experience as a lawyer in residential and commercial real estate transactions, commercial leasing, corporate and commercial transactions, and private and institutional lending.  His client base includes individuals, business entrepreneurs, developers, financial institutions, brokerages, and real estate investment trusts.

David takes an amiable and dedicated approach to practicing law. His focus is on providing his clients with the highest levels of legal service. Clients love working with David, as he always works hard in their best interests with a smile on his face. David’s sports background and leadership skills are highly influential on the growth and success of Kormans LLP as he truly believes in fostering the Kormans LLP environment as both a family and a team!

When David isn’t closing real estate and corporate transactions, David is an avid runner, hiker and sports enthusiast. However, what David enjoys most is spending quality time with his wife, kids, grandkids and friends at home, at the cottage, and on travels.

David is a frequent blogger, as well as a lecturer and panel member at seminars, webinars and workshops for real estate agents, mortgage brokers and home buyers.  Please make sure to catch “David & David on Real Estate” – David’s featured Podcast which can be heard on RadioPublic, Spotify, Breaker, Anchor and Google Podcasts, and can be viewed on the Kormans LLP YouTube channel!

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