The Canadian housing market has undergone significant changes in recent years, particularly with the introduction of a temporary ban on foreign nationals purchasing residential properties. Initially enacted in January 2023, this policy was extended until 2027 as part of the government’s strategy to improve housing affordability.
Finance Minister Chrystia Freeland emphasized the goal:
"By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class."
While the policy focuses on restricting property purchases, many non-residents wonder how it impacts property sales. If you’re a non-Canadian resident looking to sell your home in Canada, here’s what you need to know.
Can Non-Residents Sell Property in Canada?
Yes, non-Canadian residents can sell property in Canada despite the foreign homebuyer ban. The policy only restricts purchases by non-residents, not sales.
Non-resident property owners continue to enjoy many of the same real estate privileges as Canadian citizens, including:
- Mortgages: Non-residents can apply for mortgage loans if they meet financial institutions’ criteria.
- Rental Income: Property owners can generate income by renting out their homes, including through platforms like Airbnb.
However, selling property as a non-resident comes with specific tax and legal obligations that must be carefully managed.
Key Steps for Selling a Property as a Non-Resident
To sell a property in Canada, non-residents must follow regulatory procedures established by the Canada Revenue Agency (CRA). Here’s a step-by-step breakdown:
- Obtain a Canadian Tax Identification Number:
Before listing your property, ensure you have a valid Canadian tax number. - Notify the CRA Within 10 Days of the Sale:
You must inform the CRA within 10 days of the property’s sale date by completing the appropriate forms:- Form T2062: Certificate of Compliance for Disposition of Taxable Canadian Property.
- Form T2062A: Compliance for Disposition of Canadian Resource Property.
- Form T2062B: Disposition of a Life Insurance Policy (if applicable).
- Filing Rental Income Returns (if applicable):
If the property was rented out, non-residents must file Section 216 returns to report rental income and expenses. - Obtain a Clearance Certificate:
This certificate confirms that all applicable taxes have been paid. Without it, the CRA may withhold 25% of the property's gross sale price, increasing to 50% if the property was used as a rental.
Potential Penalties for Non-Compliance
Failing to notify the CRA on time can result in serious penalties:
- Late Notification Penalty: $25 per day, with a minimum of $100 and a maximum of $2,500.
- Withholding Tax: 25% of the sale price, or 50% for rental properties, if taxes remain unpaid or forms are incomplete.
Tip: If the property was your primary residence during ownership, you might qualify for a principal residence exemption, potentially reducing your tax liability.
The Importance of Expert Guidance
Navigating the complexities of selling Canadian property as a non-resident can be overwhelming. Consulting tax and legal professionals ensures compliance with tax laws, form submissions, and timely payments. With the right advice, you can avoid delays, penalties, and financial pitfalls.
What About the Housing Market?
It remains uncertain whether the foreign buyer ban has significantly impacted the Canadian housing market. Since non-resident ownership constituted a small portion of the real estate sector, the policy’s long-term effects on home prices and inventory levels are still being assessed.
Be Prepared for a Successful Sale
Selling property in Canada as a non-resident involves multiple steps, from tax filings to form submissions. Staying informed and prepared is essential to ensure a smooth transaction and avoid penalties. With proper guidance, non-resident property owners can confidently navigate the Canadian real estate market and maximize their investment returns.
Looking to sell your property in Canada? Contact RE/MAX Performance today for expert advice and seamless real estate services!