Laws for selling real estate property in Canada

Selling of property in Canada is very easy and simple. There are basic legal formalities and procedures that ensure the rights of both the parties are preserved. There are slightly different rules for people who are foreign nationals and wish to sell a property in Canada. A non resident is requires to pay an amount from capital gains in taxation.



Normally, 50 % of the capital gain is considered for taxes but if a person happens to be a non resident, he is required to pay an amount equal to the estimation before the gain which is approximately around 25% of the total gain. The amount is taken care of by the seller’s lawyer until a clearance certificate is issues by the Canada Revenue Agency. Then the payment of tax is made; CRA issues a clearance certificate to the seller. This may take up to 6-8 weeks.

The certificate is issues only after a contract of sale and purchase is made and has all the conditions removes in it. If, the certificate is not issued, the purchaser may halt all the ongoing proceedings with regard to the purchase of the property and stall the payment of 25-50% from the purchase price. At the closing date, the mortgage money is transferred to the seller’s account and the title of the property is transferred to the buyer.

A non-resident national should pay the complete taxes as applicable for the current year and wait for the refunds on the taxes as the rule goes. Different tax rules are applicable of different types of properties. Each property from principal residence, a business property or a rental property has a different set of taxation rules. For example in case of rental property, a 25% tax for foreign nationals must be paid on the total rent paid by the tenant.

It is advised to use a property manager who will, by law, withhold 25% of the total rental revenue at and pay it to the Canada Revenue Agency. After this, on or before March 31 of the coming year, the property manager issues an NR4 form which earns you the right to file a Canadian tax return. You are required to file the tax return before the 30th of June and this enables you to claim expense and refund against that income.

Here is a youtube video I find very informative. Will definately help you understand the law.