Non-Resident Tax Services

If you’re a visitor to Canada and have not established residency, you generally do not need to file a Canadian personal tax return unless you have earned income from Canadian sources. Such income might include:

• Employment Income: If you worked while visiting Canada.
• Business Income: Income from a business operated in Canada.
• Rental Income: Earnings from renting out Canadian property.
• Capital Gains: Profits from selling Canadian assets, like real estate.

If you did not earn any Canadian income during your visit, you typically are not required to file a Canadian tax return. However, tax laws can be complex, and exceptions may apply. We recommend consulting with a tax professional to determine your specific obligations.

As a non-resident of Canada earning rental income from property in Alberta, you have specific tax obligations:

1. Withholding Tax:
   • The payer (tenant or property manager) must withhold 25% of the gross rental income and remit it to the Canada Revenue Agency (CRA) monthly.
2. Optional Section 216 Election:
   • You can elect to file a Canadian tax return under Section 216 of the Income Tax Act.
   • This allows you to be taxed on your net rental income (gross income minus allowable expenses) rather than the gross amount.
   • Filing under Section 216 often results in a lower tax liability and may entitle you to a refund of excess withholding tax.
3. NR6 Form (Reduction of Withholding Tax):
   • To reduce the amount of tax withheld during the year, you and your agent can file an NR6 form with the CRA.
   • Once approved, tax is withheld on the estimated net rental income instead of the gross amount.
4. Filing Deadlines:
   • If you elect under Section 216, you must file your tax return by June 30 of the following year.
   • If you have tax owing, it’s advisable to file by April 30 to avoid interest charges.
5. Records Maintenance:
   • Keep detailed records of all rental income and expenses for at least six years, as required by the CRA.

Failure to comply with these requirements can result in penalties and interest charges. We recommend seeking assistance from a tax professional experienced in non-resident taxation to ensure full compliance.

The Underused Housing Tax (UHT) is a federal tax introduced by the Government of Canada to address housing availability and affordability. Key points include:

• Tax Rate: A 1% annual tax on the value of vacant or underused residential properties in Canada.
• Who Is Affected:
  • Primarily non-resident, non-Canadian owners of residential property.
  • Certain Canadian corporations, trusts, and partnerships may also be subject to the tax.
• Exemptions:
  • Primary Residence: Properties used as a primary residence by the owner, their spouse, or common-law partner.
  • Qualifying Occupancy: Properties occupied for at least 180 days in a calendar year under certain conditions.
  • Specified Canadian Corporations: Corporations with significant Canadian ownership may be exempt.
• Filing Requirements:
  • Even if no tax is owed due to an exemption, affected owners must still file a UHT return (Form UHT-2900) by April 30 of the following year.
  • Failure to file can result in substantial penalties, starting at $5,000 for individuals and $10,000 for corporations.
• Do You Need to File?
  • If you are a non-resident or own residential property through certain entities, you may be required to file.
  • Canadian citizens and permanent residents generally are exempt but should verify their status concerning the UHT.

We recommend reviewing your specific circumstances with a tax professional to determine your obligations under the Underused Housing Tax.

Selling Canadian real estate as a non-resident involves several important tax steps:

1. Notify the CRA:
   • You must inform the Canada Revenue Agency (CRA) before or within 10 days after the sale by submitting Form T2062.
   • Failure to notify can result in penalties of up to $2,500.
2. Withholding Tax:
   • The buyer is required to withhold 25% to 50% of the gross sale price unless you provide a Certificate of Compliance from the CRA.
   • The standard rate is 25%, but it may be higher if the property was used for rental or business purposes.
3. Certificate of Compliance:
   • Apply for this certificate by filing Form T2062 and paying any estimated tax on the capital gain.
   • Once issued, it allows the buyer to reduce or eliminate the withholding amount.
4. File a Canadian Tax Return:
   • You must file a Canadian income tax return for the year of the sale to report the actual capital gain or loss.
   • This filing allows you to calculate the precise tax owing and potentially recover excess withholding.
5. Deadlines:
   • The tax return is generally due by April 30 of the year following the sale.
   • If the property was used for rental or business purposes, the deadline may differ.
6. Calculating Capital Gains:
   • Capital gain is calculated as the difference between the sale proceeds and the adjusted cost base (original purchase price plus costs of acquisition and capital improvements).

Non-compliance can lead to significant financial penalties and complications with future Canadian investments. It’s crucial to work with a tax professional to navigate these requirements accurately.

Yes, as a temporary resident in Canada with a valid work or study permit, you can purchase real estate property. Here are important considerations:

1. Property Purchase Eligibility:
   • Recent regulations, like the Prohibition on the Purchase of Residential Property by Non-Canadians Act, restrict non-Canadians from buying residential property.
   • Exemptions: Temporary residents with valid work permits or full-time students meeting specific criteria may be exempt from these restrictions.
2. Financing and Mortgage:
   • Lenders may have additional requirements for non-permanent residents, such as larger down payments.
   • Establishing a Canadian credit history can be beneficial.
3. Tax Filing Requirements:
   • Residency Status for Tax Purposes:
     • If you reside in Canada for more than 183 days in a tax year, you are generally considered a resident for tax purposes.
     • Residents are taxed on worldwide income and must file a Canadian tax return.
   • Property Taxes:
     • You’ll be responsible for annual property taxes levied by the municipality.
   • Rental Income:
     • If you rent out the property, you must report rental income on your Canadian tax return.
     • You can deduct eligible expenses to reduce taxable income.
   • Sale of Property:
     • Capital gains from the sale of the property are taxable.
     • You may be eligible for the principal residence exemption if you lived in the property, which can reduce or eliminate capital gains tax.
4. Underused Housing Tax (UHT):
   • As a temporary resident who occupies the property, you are generally exempt from the UHT but may still need to file a return.

Purchasing property is a significant investment. We recommend consulting with financial and tax professionals to fully understand the implications and to assist you throughout the process.

If you’re planning to leave Canada and will become a non-resident for tax purposes, there are several important tax obligations and steps you should take before your departure to ensure compliance with the Canada Revenue Agency (CRA):

Determine Your Residency Status:

• Residency for Tax Purposes: Your tax obligations depend on whether you are considered a resident, deemed resident, or non-resident of Canada. Factors include the length of time you’ve lived in Canada, residential ties (such as a home, spouse, or dependents), and your intentions.
• Non-Resident Status: If you sever significant residential ties with Canada, you may be considered a non-resident for tax purposes from the date of your departure.

File a Final Tax Return (Departure Tax Return):

• Worldwide Income Reporting: On your final tax return as a resident, you must report your worldwide income from January 1 of the year you leave up to the date you become a non-resident.
• Due Date: The tax return is generally due by April 30 of the following year.
• Form T1 General: Use the regular income tax package for your province or territory of residence on the date you ceased residency.

Deemed Disposition of Assets (Departure Tax):

• Capital Gains Tax: When you leave Canada, you’re deemed to have disposed of certain types of property at their fair market value (FMV) immediately before departure, which may result in capital gains or losses.
• Excluded Properties: Some assets are excluded from deemed disposition, such as:
  • Canadian Real Property: Real estate located in Canada.
  • Registered Accounts: RRSPs, RRIFs, TFSAs.
  • Pensions and Annuities: Canadian pension plans and annuities.
  • Reporting Gains/Losses: You must report any capital gains or losses from deemed dispositions on your departure tax return.