FAQs
Can I mortgage the purchase of a property in Canada?Yes you can. Non-Canadians may obtain mortgage financing of up to 65% of the purchase price, and in some cases up to 75%. A line of credit, secured against currently owned property, may also be set up to provide additional financing, on a case by case basis. If mortgaging, it is best to arrange a mortgage through a local Canadian bank or through a local mortgage broker. A local mortgage provider will be made available to all clients, upon request, for questions or mortgage applications.
Are the Properties Freehold?
Yes, in two different legal forms. Most properties currently offered are condominium ownership, meaning you own your home (titled to you) in addition to owning a pro-rata portion of all the common property and amenities of the project. This type of ownership is for apartment style, townhouse style, and semi-detached projects. Detached homes are freehold for both the building and land.
Can I resell my property and is there capital gains tax?
There are no restrictions regarding resale of your property. If the sale price of the property is greater than the original purchase cost, tax will be assessed against only half of the capital gain. Capital gains tax is not applied to the sale of a home used as a primary residence.
What purchase tax is payable on property?
GST (federal goods and services tax) is required on the purchase of all goods in Canada, including newly constructed real estate, and is 5% of the purchase price. In Alberta, there are no further purchase taxes, but in all other Canadian provinces there is an additional HST component which adds 12-14% to the purchase price of a home. In Alberta this tax does not exist, giving Alberta the lowest purchase tax rate in Canada, in addition to very low annual property tax rates and the lowest personal and corporate tax rates in Canada. There are no stamp duties in Alberta.
What other costs are involved when purchasing real estate?
Other than furniture and sundries the only additional cost involved with your purchase will be your legal fees and the cost of title and mortgage registration. These costs will be approximately $1,000 CAD. In many cases your builder may offer you the option of reducing legal costs by using their solicitor, in which case only miscellaneous and registration/disbursement costs will apply.
How do I Emigrate?
Canada has a certain criteria for allowing people to emigrate. These usually include looking to start a business, invest or continue to practice in a specialist profession. Please look at the Citizenship and Immigration Canada website for more information.
Do I need an accountant if I buy a rental property?
It is best to employ the help of an accountant as Canada has some tricky tax laws due to them all being different from one province to another. Luckily accountants are very affordable - you can expect to pay anywhere from $300 to $900 (depending on the amount of work the accountant is doing for you).
What are the tax implications if I buy a rental property?
(1) The tax rate on the initial $37,178 earned though rentals is taxable at a rate of 23%. Canada has income tax treaties with several countries including the UK so this may alter the taxable income rate.
(2) GST (Good's and Services Tax) applies to holiday rentals in Canada. GST is not payable on long term accommodation.
(3) When you buy a property in Canada, the 5% GST is payable, plus any provincial tax which varies from province to province (Alberta is zero). An exemption is possible if you do not use your property for more than 10% of the year (a maximum of 36 days a year, or 9 days in the case of fractional ownership). In order to benefit from this exemption, you must register for GST (or/and QST in the case of Quebec) before the purchase completes.
(4) Taxation pertaining to rental income in Canada favour the owner. There are so many deductions possible, that it is crucial that you keep all receipts for use at the end of the fiscal year. Examples of possible deductions are: mortgage interest, property taxes, insurance, maintenance costs, heat, electricity, water costs, management fees, some travel expenses, furniture, repairs, etc. Mortgage interest payments are also deductible in full. This works to your advantage in a significant way, so the copy of the mortgage agreement as well and a repayment record should be supplied to your accountant.
(5) On sale of your property, you will have to pay a Capital Gains tax on the difference between what you paid for the property and the sale price. If there was actually depreciation, you will be able to deduct the depreciated difference to any income. The actual amount of Capital Gains tax payable is 50% taxed on half the amount of appreciation. This has the effect that you will pay no more than 25% of the gain you receive.
Please note all the figures quoted are subject to change and are a guide only.