4 UNFAIR ADVANTAGES FOR NON-RESIDENTS TO INVEST IN TORONTO REAL ESTATEBy CondoWong Saturday, October 05, 2019
As a Canadian Non-Resident, you may think that there are extra taxes you have to pay when you invest in Toronto.
Surprisingly, opposite to what you thought, there are actually 4 unfair advantages for Canadian non-residents to invest in Toronto.
When you hear about the 15% Non-Resident Speculation Tax charged on the purchase of a property in Toronto, you would think that applies to you, as the name suggests, right?
Well, it’s a very confusing name.
The word “non-resident” in the Non-Resident Speculation Tax is actually defined by the immigration status.
Non-resident in this tax refers to foreigners who are not Canadian citizens, that means Non-Canadians.
If you are a landed immigrant, you are also exempted from this tax.
When you refer to yourself as a Canadian non-resident, you are referring to your tax status and not your immigration status.
As long as you are a Canadian, doesn’t matter where you live, the 15% Non-Resident Speculation Tax does NOT apply to you.
As long as you are a Canadian, you’re fine.
#2 Tax on Rental Income
When we collect rental income, we need to pay taxes on the net rental income.
So is there any difference in the tax rate between residents and non-residents?
As residents, we pay taxes based on our income tax bracket. If I’m at the 50% tax bracket, then I need to remit half of my net rental income as taxes.
As a non-resident, the tax rate for your net rental income always stays at 25%.
For example, you collect a rent of $2,000 per month from a 1 bedroom unit.
You can deduct expenses such as condo fees, property tax, mortgage interests, rental management fee from your rental income.
Being able to deduct the mortgage interest from your rental income is another advantage.
It’s a significant amount in the equation, but it won’t be considered a valid expense in many countries.
Let’s just say you have $1,000 net every month, that’s $12,000 per year.
You need to pay 25% of that to the government, which means $3,000 per year.
As a resident, I would be paying $6,000 to the government.
#3 Tax on Capital Gain
The same rule applies to capital gain.
Residents, based on the income tax bracket.
Non-residents, always 25%.
Let’s say your net gain from selling your property is $100,000, you will need to pay 25%, that’s $25,000 to the government.
I would have to pay double of yours, that’s $50,000 to the government.
#4 Tax on Multiple Properties
In many countries, you need to pay extra taxes or stamp duty when you buy a 2nd property.
In Toronto, there is no extra taxes on the 2nd property. You can buy as many investment properties as you want without incurring extra taxes.
Those are the 4 unfair advantages for non-residents to invest in Toronto.
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