There are no restrictions on the purchase of property or businesses in Ontario by non-resident investors. This means that you are free to purchase homes, commercial properties, businesses, or agricultural land. There is no requirement for residency or even physical presence in Canada.
Financing for purchases may be arranged through any of the Canadian chartered banks or through an independent mortgage broker. Typically non-residents will be asked for a higher downpayment – generally at least 35% by the major banks, although some lenders may accept 25%. A mortgage broker can assist you in finding the most attractive financing terms.
Owning property in Ontario does not create any right of residency. The normal immigration rules for visas, work permits and immigration applications still apply. However ownership of Canadian property does indicate a connection to Canada and may be a favourable element in the assessment of your residency application.
Purchasing a property for rental will require filing certain Canadian Revenue Agency (CRA) tax forms. For non-residents receiving rental income, 25% of the rent received must be forwarded each month to the CRA as a withholding tax. This forwarding must be done either directly by the tenant, or by a Canadian agent appointed by you as the investor.
On sale of the property, an intention to sell must be forwarded in advance in order to reduce the capital gains withholding to 25% of the net proceeds. At the beginning of the following calendar year, you may then elect to file a Canadian Income Tax return which may further reduce the tax by claiming for allowable improvement expenses, professional fees and other transaction expenses. Your accountant will advise you on whether it is favourable to file a return.
For properties rented out as residential property, there is no requirement to collect or remit the Harmonized Sales Tax (HST) which is the Canadian VAT. However for commercial or business income, it will be necessary to register for an HST filing number and to make monthly or quarterly remittances. All of this may be done on line, however it is strongly advised to involve a Canadian accountant or bookkeeper to handle these filings.
For anyone contemplating the purchase of an investment property or business, it is essential to speak with a Canadian Chartered Accountant in advance of any purchase to ensure that you understand the reporting and taxation requirements of your investment. The accountant will be able to prepare the CRA filings and to advise you on how to pay the minimum taxes while remaining entirely compliant with the CRA regulations.
In looking for a property, you are strongly advised to work through a licensed Realtor based in the community where you intend to buy. A Realtor will provide you with accurate, current information about properties and community facilities, and will be able to provide current market appraisals of the value to properties you are considering. In Ontario, licensed realtors also are legally liable for the accuracy of information provided, and for any errors or omissions made in the purchase process. This gives you an added layer of protection in the event that something goes wrong.
Before working with the Realtor, it is important to sign a Buyer Agency agreement. Make sure you understand the terms and any fees that you will be required to pay. The Buyer Agency Agreement establishes that the Realtor is working in your best interests, and not for the property seller. Realtor fees are normally due on successful completion of a purchase and are generally paid out by the lawyer directly from the proceeds of the sale.
In summary, there are no restrictions on the purchase of land by non-residents. You are advised to engage a licensed Realtor for your search, and to use the services of a lawyer to complete the purchase. Financing is available through the major banks, or through a mortgage broker. And for the purchase of a commercial property or business, it is strongly advised to speak with a Chartered Accountant before beginning your search.
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