Protect your way of life In British Columbia, you will be required by the bank or financial institution that is providing your mortgage to have insurance in place on your new property as of the completion date. For strata properties, insurance on the building is the responsibility of the strata corporation and, therefore, is already looked after; the buyer is responsible for insurance on contents and significant finishing upgrades. For single family homes, you will need to contact an insurance broker and provide them with details on your property prior to completion date. Note that insurance for properties that remain unoccupied is more expensive to insure than those that are occupied. Sometimes it can be beneficial to have a tenant. Here is a list of providers:
RHC Insurance Brokers: 250-364-1285
Whitlock Insurance: 250-368-9188
Kootenay Insurance Services: 250-368-9174
Legal fees (Conveyance) and disbursements associated with a real estate purchase are about $1,000 Cdn, assuming a typical purchase conveyance and a conventional mortgage. Legal fees may be higher for out-of-country buyers or non-conventional financing situations. Property Transfer Tax The rate is 1% on the first $200,000 of the purchase price and 2% on the balance. Some buyers may qualify for an exemption on the property purchase tax if they meet the following criteria: 1. The buyer has never owned property; 2. The buyer is a British Columbia resident; and 3. The buyer has resided in Canada for the past 12 months.
The Canadian Income Tax Act contains rules which are intended to ensure compliance by non-residents who dispose of taxable Canadian property. These rules potentially shift the vendor’s tax burden to the purchaser by imposing a withholding obligation on the purchaser based on the gross purchase price payable for the taxable Canadian property. The non-resident vendor must then apply for a Clearance Certificate to reduce the withholdings and ultimately file an income tax return to obtain credit for any costs (legal fees, etc.) associated with the sale. Generally, any person (including another non-resident) who is purchasing a taxable Canadian property from a non-resident is required to withhold 33 1/3% of the gross purchase price and remit this to the Canadian government in respect of the non-resident vendors tax liability. The vendor may apply for a Clearance Certificate in advance of the closing date, which would permit the purchaser’s withholdings to be based upon 33 1/3% of the vendor’s estimated capital gains (determined before commissions and other costs of sale). If the sale of taxable Canadian property is not reported in advance of the transaction, the non-resident vendor is required to notify the Tax Department, by registered mail, within ten days after the date of sale. This notice will usually be made in the form of a Clearance Certificate application (form T2062). In these ‘post-closing’ Clearance Certificate applications, the purchaser withholds on closing 33 1/3% of the gross purchase price and then releases to the vendor any excess of the amount withheld over the ‘Certificate Amount’ (being one-third of the vendor’s estimated gain before selling expenses). A six to ten week delay in processing Clearance Certificates is not unusual. In computing the estimated capital gain on form T2062, outlays and expenses related to the sale, including real estate commissions and legal fees may not be claimed. These amounts may be claimed when the non-resident vendor files a Canadian income tax return for the calendar year that includes the disposition date. These filings generally result in a refund of tax to the non-resident vendors. Generally, the Canadian income tax return for an individual is due April 30th of the following year. Unlike the United States, extensions to file returns are not available. Late-filed returns are subject to penalties and interest on any amount unpaid by the filing deadline.
A large percentage of our Greater Trail Area home buyers and investors live around the world. A real estate purchase by a non-resident can be simple and stress-free by using the services of a Canadian accountant or lawyer specializing in British Columbia real estate. Canadian income tax legislation requires non-residents to pay 25 per cent of gross rental income to Canadian taxation authorities as security for actual taxes due. Purchasers can frequently obtain an exemption from this requirement by formally filing a budget: property rental managers usually assist with this. It’s important to file annual income tax returns in order to retain the exemption. Non-resident corporations need to provide extra documentation to satisfy land registration requirements. For instance, if the corporation is going to carry on commercial activity (rent property on a nightly basis), then the corporation will have to be extra-provincially registered in B.C. If it is a one-time purchase and the corporation does not do business in B.C., the corporation will only have to file a certificate of incorporation, certificate of good standing and affidavit of no commercial activity. Extra-provincial registration is more involved. Both procedures take time and completion dates should reflect this. Original documentation is required from the home jurisdiction’s authority over corporations. Our affiliate mortgage brokers are a valuable resource for non-residents investing in Greater Trail Area real estate. The majority of tax-related issues relating to non-residents arise when a non-resident is selling