What does withholding tax mean and to whom it applies?

[Karim Saleh]

Dear All,

I planning to come to Canada as an International Student. I read that if non-resident in Canada owned a real estate and wants to sell it, Canadian government takes 50% of any sale as a withholding tax? I do not understand this!

Does the term 'non-resident' applied to the International Students (Study Permit) in Canada?
If yes, does the withholding tax mean that the government will take half of the real estate price when it is sold? will the seller (international student here) have the right to receive this 50% back from the government if he/she is in Canada on Study Permit and pays the real estate annual taxes?

I hope you have information about this
Thanks!

 

[torontosm]

Dear All,

I planning to come to Canada as an International Student. I read that if non-resident in Canada owned a real estate and wants to sell it, Canadian government takes 50% of any sale as a withholding tax? I do not understand this!

Does the term 'non-resident' applied to the International Students (Study Permit) in Canada?
If yes, does the withholding tax mean that the government will take half of the real estate price when it is sold? will the seller (international student here) have the right to receive this 50% back from the government if he/she is in Canada on Study Permit and pays the real estate annual taxes?

I hope you have information about this
Thanks!

The withholding tax is intended to ensure that the CRA collects the monies it is owed. As a non-resident, once you sell your property, the buyer is obligated to withhold 25-50% of the sale price (usually in trust with their lawyers) until the seller produces a CRA certificate stating the amount of capital gains tax owed by the seller. The buyer then remits this amount to the CRA and can release the remaining funds to the seller. The seller then "trues-up" any discrepancies in their annual tax filing.

The term "non-resident" means anyone who is residing outside Canada and has no significant ties to Canada. As a student, you would be considered to be a resident by the CRA so all of this is moot.

 

[Karim Saleh]

The withholding tax is intended to ensure that the CRA collects the monies it is owed. As a non-resident, once you sell your property, the buyer is obligated to withhold 25-50% of the sale price (usually in trust with their lawyers) until the seller produces a CRA certificate stating the amount of capital gains tax owed by the seller. The buyer then remits this amount to the CRA and can release the remaining funds to the seller. The seller then "trues-up" any discrepancies in their annual tax filing.

The term "non-resident" means anyone who is residing outside Canada and has no significant ties to Canada. As a student, you would be considered to be a resident by the CRA so all of this is moot.

Thank you very much. It is clear now.

I have another question. I will come as an International Student and I want to invest - during my stay in Canada - in real estate to help me covering my coasts. I am doing this now here in my home country, Egypt. What i am doing is just buying a house, an apartment, or a lot. Then after around 3 months i sell it with a little bit revenue (say i buy by 50 i sell with 52, and so on). I do not know how things are done in this regard in Canada. So, does it go in the same way in just explained? or it will be very difficult, or even not applicable? what do you think?

 

[zardoz]

Thank you very much. It is clear now.

I have another question. I will come as an International Student and I want to invest - during my stay in Canada - in real estate to help me covering my coasts. I am doing this now here in my home country, Egypt. What i am doing is just buying a house, an apartment, or a lot. Then after around 3 months i sell it with a little bit revenue (say i buy by 50 i sell with 52, and so on). I do not know how things are done in this regard in Canada. So, does it go in the same way in just explained? or it will be very difficult, or even not applicable? what do you think?

By the time you have done this, you will almost certainly have lost money, in realtor and legal fees, property and capital gains taxes etc.

 

[steaky]

Thank you very much. It is clear now.

I have another question. I will come as an International Student and I want to invest - during my stay in Canada - in real estate to help me covering my coasts. I am doing this now here in my home country, Egypt. What i am doing is just buying a house, an apartment, or a lot. Then after around 3 months i sell it with a little bit revenue (say i buy by 50 i sell with 52, and so on). I do not know how things are done in this regard in Canada. So, does it go in the same way in just explained? or it will be very difficult, or even not applicable? what do you think?

It depends on the market condition. Right now it will be very difficult in metro Vancouver.

 

[Karim Saleh]

Thank you All. So, do you have any idea of how to invest in the real estate while i am an international student (instead of buying and selling in a short period)? I do not like working on a part-time job. I prefer to be self-employed rather than being an employee.

I have checked www.realtor.ca and I found some houses and mobile houses that are cheap, but when i search for them on Google Earth, i found them in a very far areas from the downtown. Can i buy one of them and rent it? will this be profitable? do you have an idea of how to invest a small or medium budget in this sector?

I am sorry, but i did not visit Canada before and I did not land till now there, so i would like to have a background about these things before i go there.

 

[scylla]

Thank you All. So, do you have any idea of how to invest in the real estate while i am an international student (instead of buying and selling in a short period)? I do not like working on a part-time job. I prefer to be self-employed rather than being an employee.

I have checked www.realtor.ca and I found some houses and mobile houses that are cheap, but when i search for them on Google Earth, i found them in a very far areas from the downtown. Can i buy one of them and rent it? will this be profitable? do you have an idea of how to invest a small or medium budget in this sector?

I am sorry, but i did not visit Canada before and I did not land till now there, so i would like to have a background about these things before i go there.

You need to work with a real estate agent. The process isn't as simple as that and the price you see on realtor.ca is not the total cost you'll eventually have to pay. In addition to the price of the property, there are also a number of closing costs and tax to pay. Additionally, it's not always easy to find good renters and quite possible that the rent will only cover your costs rather than earn an income. Properties are also taxed differently (higher) if you purchase them as rental properties rather than as your primary residence. Again, I would start working with a good real estate agent if this is something you really want to pursue.