Buying a home in Canada from a non-resident seller

Many people own more than one piece of real estate.  Perhaps it’s a cottage, or a condo that was rented out for investment purposes.  In some cases, the owner may not even live in Canada anymore.

If you’re buying a home (or any real estate) in Canada from a seller who normally does not live in Canada (called a non-resident), you may be liable for additional taxes if you are not careful.  Under section 116 of the Income Tax Act of Canada, a buyer who buys Canadian property from a non-resident may be liable for up to 25% of the capital gains the non-resident seller made on the sale.

In such cases, the buyer must obtain a Clearance Certificate issued by the Canada Revenue Agency under section 116 to relieve them of this tax liability.  The process to obtain this certificate can be complex and must involve the seller’s lawyer and the seller’s accountant working together.  In some cases, CRA can take a few months to issue the certificate.  If you are a non-resident seller, or are buying property from a seller who normally does not live in Canada, consult your lawyer about the s. 116 clearance certificate process.

About David Lam

David Lam is a lawyer practicing business law, real estate law, intellectual property law (patents, trademarks, copyright, licensing), and litigation in the Greater Toronto Area. For more information and to contact David, please visit http://www.davidlam.ca.
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