Costs to Consider When Selling Real Estate in Canada as a Non-Resident

Selling real estate in Canada as a non-resident involves several fees and tax obligations. Here is an overview of the main costs to consider.

1. Withholding Tax at Source Upon Sale

This withholding tax is not a cost in itself, as a portion will often be recoverable at subsequent stages, but it is a cash-flow event to anticipate.

• The buyer is required to withhold 25% of the gross sale price, or 37.875% if the sale is completed in Quebec (or 50% to 62.875% if the property is depreciable), and remit it to the tax authorities.

• This withholding tax is an advance payment on the final tax liability. After reception of the certificate of compliance and filing the final income tax return, any overpayment can be recovered.

2. Capital Gains Tax

Non-residents must pay Canadian tax on realized capital gains calculated as follows:

Capital Gain = Sale Price – Adjusted Acquisition Cost

• The effective tax rate depends on total income according to progressive tax rates and can reach approximately 25% of the capital gain.

• At the capital gains tax return stage, the actual tax is calculated, and the amount withheld as an advance payment to the notary is taken into account when calculating the applicable refund.

• Since the tax withheld at the time of sale and issuance of the certificate is almost always higher than the actual tax, a refund is generally expected at the income tax return stage.

3. Legal Fees Related to the Sale

• Fees for the notary or lawyer to prepare the deed of sale, verify the title, etc.

• Generally $1,000 to $3,000, depending on the complexity of the transaction.

4. Real Estate Agent Fees

• If the sale is handled by a broker, the commission is generally between 3% and 7% of the sale price.

5. Certificate of Compliance Fees (Form T2062)

• No direct fees to the tax authorities, but fees may apply for assistance from your tax advisor.

6. Other Fees

• Inspection fees, appraisal fees, and various disbursements depending on the transaction.

Summary of Main Costs

• Withholding tax: 25% or 37.875% of the gross price (50% or 67.875% if fully depreciable), adjustable after filing. Not a true cost per se.

• Capital gains tax: Varies depending on the gain

• Legal fees: Between $1,000 and $3,000

• Real estate agent commission: Between 3% and 7% of the sale price

• Additional expenses: Inspection, appraisal, etc.