Listen to Podcast Episode 124 titled “Non-Resident Taxes Part II” which delves into the complexities of non-resident tax issues when buying and selling real estate in Canada. In a previous blog post from February 2016, I discussed the implications of non-resident tax for buyers, sellers, and real estate agents. Non-resident tax is a serious matter that should not be taken lightly. If you are dealing with a non-resident tax situation, I highly recommend reading the previous post before diving into the case study discussed below.
In a recent case study from an Edmonton law firm (RMLO Law LLP), we explore the principles that can be applied to non-resident tax issues in the real estate sector. The Canada Revenue Agency (CRA) places the responsibility for a non-resident seller’s tax on the buyer when purchasing real estate. This is to avoid having to chase non-residents who leave the country without paying their taxes.
For example, a recent sale of a principal residence in Alberta highlighted the challenges of non-resident tax. The seller was required to have 25% of the sale price withheld by the buyer until a Certificate of Compliance from the CRA was obtained. Despite selling the property at a loss and being eligible for a principal residence exemption, the seller still faced difficulties due to the CRA regulations.
To resolve the situation, a creative solution was reached through an addendum to the real estate purchase contract. The seller provided all relevant financial information and agreed to have the net sale proceeds held in trust until the CRA responded to the Certificate of Compliance application.
Dealing with non-resident tax problems in Canadian real estate transactions requires early intervention, involvement of accountants, full disclosure of financial information, and open communication between all parties involved. It is crucial to seek advice from experienced professionals such as realtors, accountants, and lawyers to navigate the complexities of tax issues effectively.
If you are facing a non-resident tax issue in Alberta, don’t hesitate to contact Barry McGuire, an experienced real estate lawyer, for assistance. Remember, tackling tax issues alone can lead to complications, so seek expert advice early on.