The Canadian real estate market is powerful and possibly very profitable. Even during the worst economic times of the new millennium, real estate in Canada weathered the storm remarkably well. Plus, there are no citizenship or residency requirements for possessing property in Canada. Really, you can live in a Canadian residence on a temporary basis, even without residency or citizenship; though there are immigration requirements for extended stays. However, the market is open to investors round the world but to take advantage of your investment, it is necessary to really have a sound comprehension of taxes in Canada.
Property taxes in Canada will differ from province-to-state and even determined by the municipality. Among the very first things you have to understand is that when you purchase property here, you will have to pay a provincial transfer tax. Again, this varies between provinces, but you must expect to pay between 1 and 2% of the value of the entire property. Occasionally, there are exemptions to this transfer tax; for instance, the first property you buy in Canada will not carry this transfer tax.
As I’ve already alluded, annual property taxes are mandatory and vary by municipality. Based on the assessed value of your property as determined by the marketplace, property taxes comprise fees for schools, parks, and other community amenities.
Eventually, you’ll also pay the federal Goods and Services Tax (GST) on new home purchases. In case you plan to live in the home, and it’s also a brand new or contractor-renovated dwelling, you may be eligible for a partial rebate on the GST.
Rental Property Taxes:
Should you plan on purchasing an investment property in Canada with the aim of renting the property for income, you need to know about the Canadian Income Tax Act demands. The Act stipulates that you pay 25% of the gross property rental income as tax. To understand more regarding Eddie Yan have a look at this page. Non-residents can generally choose to pay 25% of the net rental income instead; this means you can deduct a lot of the expenses connected with running the property – you simply need to submit an NR6 form. Certain expenses can’t be deducted, however; for example, operating and expenses and capital expenses can be deducted, while the cost of furniture or equipment for a rental property cannot. Additionally, property taxes as well as mortgage, bank loan, or line of credit interest payments are all tax deductible.
Selling your Property:
Pay close attention, as selling your property in Canada has different costs for residents and non-residents. Residents who inhabit a property as their principal place of dwelling can sell a property without paying capital gains tax. If you own multiple properties, you must designate just one property as your principal place of dwelling. Sale of properties that are not your principal place of residence are subject to capital gains tax.
Non residents when selling a property are subject to a 50% withholding tax, and American residents must also report the gains to the Internal Revenue Service. As you are able to observe, there are important tax implications for buying and selling properties in Canada.