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Information for Foreign Sellers

Information for Foreign Sellers and the Taxes that are included…

The tax rate for homeowners in Vancouver has drastically gone up over the past several years. We have another blog post which you can view here, that touches on the new Speculation Tax & Empty Homes Tax.

In this post we are going to specifically talk about the taxes that are due for foreign sellers. The media has highlighted the increase of taxes for foreign buyers, so let’s dive into the seller’s side.

Vancouver Real Estate Agent Leo Wilk |

Steps for Foreign Sellers

The taxes that come with selling a property as a foreign seller are not specifically on the property itself as when buying a property, rather they are on the capital gains. The Income Tax Act of Canada states that when any non-resident sells/disposes of property in BC the non-resident is required to pay the appropriate amount of taxes on any gain.

Certificate of Clearance – As stated by BC Real Estate Lawyers, “In order to satisfy the Buyer that the appropriate amount of taxes are paid, the Seller must provide to the purchaser, on or before closing, a clearance certificate from Revenue Canada. This certificate is issued by the federal government and certifies that a certain amount of money is payable for the taxes.  The amount owing is deducted from the sale proceeds and sent directly to the federal government by the Seller’s lawyer.” This certificate is usually required on the date of closing. The application for the certificate may be made prior to closing by the Seller, but not until there has been a subject free contract of purchase and sale.  The wait for the clearance certificate is usually around 3 months, so in a perfect world, there would be a 3-month lead-time between subject removal and the completion date.

Important…

It is important to note that the certificate is for the selling price, and not the equity that is in the property. The buyer’s lawyer is required to hold back 25-50% of the proceeds from the sale in order to comply with income tax protocol. These percentages vary depending on whether the property is non-depreciable property (a residence of the Seller), depreciable property (the property has been rented), or inventory (Seller is a builder).

 

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Spagnuolo and Company is able to assist non-residents apply for their clearance certificate, eliminating the need for the client to retain both a law firm and an accounting firm. Here is a link to their site. 

 

For more information on real estate market in Vancouver, current trends, buying a home or selling a home, contact Leo Wilk – Your Top Vancouver Realtor.

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