Foreign Resident Tax on a Canadian Property if returning to Canada?
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Thread: Foreign Resident Tax on a Canadian Property if returning to Canada?

  1. #1
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    Question Foreign Resident Tax on a Canadian Property if returning to Canada?

    Hi All -

    I'm currently living in the U.S. (Canadian citizen), and want to co-buy a property in Canada partially as an investment but mostly to help out loved ones.
    I've read that i'd be subject to non-resident tax upon sale and on any income.

    If I return to Canada later in life and decide to sell the property, would I be subject to non-resident tax pro-rata for the amount of time I was away, or would I be considered a resident and OK at that time? I may even live in the place before selling it.

    Thanks in advance for the help!


  2. #2
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    Quote Originally Posted by oob View Post
    ... I'm currently living in the U.S. (Canadian citizen) ...
    There's been a number of posts from people who didn't follow the process when emigrating from Canada.
    Were you ever a Canadian tax resident? If yes, was the emigration process followed to be sure CRA sees you as a non-resident (NR)?
    http://www.cra-arc.gc.ca/tx/nnrsdnts...sdncy-eng.html
    http://www.cra-arc.gc.ca/tx/nnrsdnts.../lvng-eng.html


    Quote Originally Posted by oob View Post
    ... and want to co-buy a property in Canada partially as an investment but mostly to help out loved ones.
    According to this article, co-buying with a Canadian resident means you'll have to qualify as a NR, which seems to have higher requirements (ex. a 35% down payment where at times, Canadians have qualified with a 10% down payment).
    http://www.getwhatyouwant.ca/faq-buy...esident-buyers


    Quote Originally Posted by oob View Post
    ... I've read that i'd be subject to non-resident tax upon sale and on any income.
    My understanding is that when selling while a US tax resident, the full capital gains will be taxed by Canada as well as being reported on your US tax return. Where you paid taxes on your gains to the Canadian government, you can offset your U.S. tax by claiming a foreign tax credit on your return ... but you have to be aware of it and claim it.

    For rental income, Canada will tax it - though I'd have to dig further to verify the amounts.
    http://www.moneysense.ca/spend/real-...n-real-estate/
    http://realtybiznews.com/what-u-s-in...nada/98720678/


    Quote Originally Posted by oob View Post
    ... If I return to Canada later in life and decide to sell the property, would I be subject to non-resident tax pro-rata for the amount of time I was away, or would I be considered a resident and OK at that time?
    Changing from a NR to a Canadian tax resident does nothing to change that one reports capital gains when a rental property is sold on a Canadian tax return. It looks like it may change the range of deductions and credits available to you. What will change is that your world wide income will be taxable by Canada instead of just the Canadian sourced income.


    Quote Originally Posted by oob View Post
    ... I may even live in the place before selling it.
    Living in it where one is a Canadian tax resident may allow one to claim the principal residence exception. However, as I understand it - the change in use will only shelter future growth.

    For example, looking at capital gains taxes only, say one:
    - bought for $300K as a rental property.
    - one become a Canadian tax resident when the property was worth $500K
    - one moved into it as one's primary residence when the property is worth $900K
    - one sells when it is worth $1.2 million.

    As I understand it, best case is that one will pay capital gains tax on the FMV when the use changed minus cost = $900K - $300K = $500K.

    The primary residence exemption may take care of the $300k it grew, after the change of use happened. Knowing FMV is important when the use changes, which is why a market valuation is recommended at the time of the change of use to provide proof, in case CRA questions the numbers.

    http://www.taxtips.ca/filing/principalresidence.htm
    http://www.taxtips.ca/personaltax/pr...hangeinuse.htm


    Cheers


    PS

    Keep in mind that capital gains is one of the cheaper Canadian taxes to pay. Where after expenses, one has a $200K capital gain - the tax form one reports it on multiples this by 50% to end up with the "taxable capital gain" (i.e. $100K).
    Last edited by Eclectic12; 2017-03-14 at 10:17 AM. Reason: added PS

  3. #3
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    Thanks E. This is hugely helpful.
    I just filed by 2016 tax returns, I have no property in Canada / few ties and believe I'll be seen as a NR. thanks for the links

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  5. #4
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    Quote Originally Posted by oob View Post
    Thanks E. This is hugely helpful.
    You are welcome.


    Quote Originally Posted by oob View Post
    ... I just filed by 2016 tax returns ...
    Maybe it's that I only had to file one US tax return for working in the US one year ... but what why multiple tax returns?


    Quote Originally Posted by oob View Post
    ... I have no property in Canada / few ties and believe I'll be seen as a NR. thanks for the links
    Several who emigrated that didn't put a date of departure on their final tax return report CRA assessing them estimated taxes as well as asking questions. It's up to you but to avoid any future issues, I'd be talking to CRA to make sure they see it the same way.


    Cheers

  6. #5
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    Sorry, I should have been more clear. I left early 2016, and had 2 weeks or so worth of income last year. I filled out that departure section. Will definitely check with them to make sure everything is kosher.


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