Non-Residents Investing in Canadian Real Estate Update

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INCOME TAX
In the most common scenario, a registered vendor sells a
Acquisition
commercial property to a registered purchaser. If the pur-
Advising with respect to appropriate ownership structure
chaser registers for HST before the “closing” date, the HST
Coordinating with your realtor and lawyer
will usually be waived on the purchase. If the purchaser is
Calculating the Adjusted Cost Base of land, building and
not registered by the closing date, the HST cannot be
furniture
waived, however, the purchaser can register at a later date
Annual
and claim the ITC on their first HST return.
Preparing and filing the Regulation 805 waiver
Coordinating with property manager regarding withholding
In order to claim the full ITC, the property must be used at
taxes
least 90% of the time for business purposes. If the prop-
Capitalizing expenditures to the cost of property
erty is used between 50 and 90% for business purposes, the
Preparing and filing the T1 personal tax return, including
ITC must be prorated for the amount of personal use. If
preparing business income statement
the property is used more than 50% for personal use, nei-
Coordinating and replying to requests for information and
ther the waiver of HST nor an ITC can be claimed.
other review or audit requests by CRA
Disposition
A registered purchaser can also claim ITCs for the HST
Estimating and explaining income tax on capital gain
paid on acquisition fees (e.g. inspection, appraisal and
legal) and the purchase of furniture, fixtures and improve-
Preparing the request for Certificates of Compliance and Canadian
Comfort Letter, and arranging payment of estimated taxes to
ments.
CRA and delivery of Certificates to lawyer Tax for Non-residents
Preparing and filing the T1 personal tax return to report gain
Nightly rentals—HST must be charged on business reve-
nue earned on a nightly basis. The property manager will
on sale and apply for income tax refund, if applicable Investing in
generally charge and collect the HST on the nightly rentals.
The property manager will either remit the HST collected
HST
Acquisition
Canadian Real Estate
directly to CRA monthly, or forward the HST to the owner. Advising with respect to HST implications on purchase and
If the owner receives the HST from the property manager, operations of commercial rental property
he must pay it to CRA when he files the annual HST re- Registering for HST with CRA (Producing “Business” Income)
turn. Coordinating with property manager regarding payment of
HST on business revenues
HST return—Generally, the HST return is prepared and
Annual
filed annually on a calendar basis. The deadline for filing
Calculating, preparing and filing the annual HST return,
is March 31 of the following year. If the HST collected by
including application for refund
the property manager is sent to the owner, this “HST pay-
Disposition
able” must be reported and paid by the owner.
Preparing and filing the final HST return
Cancelling HST
The registered owner may also claim ITCs for the HST
included in expenses paid (e.g. repairs, maintenance, man- Tax planning issues which should be discussed include
agement fees, strata fees, utilities etc.). Any ITC must be ownership structure, capitalization of expenditures to reduce Providing You
prorated for personal use. tax on future gains, potential capitalization of interest
expense, risks of borrowing outside Canada, treatment of with Peace of Mind
Sale—HST must be charged on the sale of a commercial
income as business income and other issues.
property. 2f/a2/NRBrochureBusiness November 16, 2010
For more detailed pamphlets, questions, or information

on nightly rentals, monthly rentals or buying with no
rental, please see our web site and please contact us.
Don Nishio CA
659-G Moberly Road, Vancouver, BC Canada V5Z 4B2
Tel: 604-872-8883 Fax: 604-872-8889
don@lamlonishio.ca www. lamlonishio.ca
!"#$%&'(")'*+(",-&+'*(.! payments, accounting fees and depreciation (referred to as
“Capital Cost Allowance” or “CCA”). Some expenses may
In the Certificate application form T2062, CRA requests
information regarding the income earned from the prop-
have to be pro-rated if there is personal use of the property. erty during the period of ownership. If income has been
Purchase—Property Transfer Tax is payable at the time of earned from the property but withholding taxes have not
purchase. This tax is calculated as 1% on the first $200,000 Business losses can be carried back 3 years or forward 20 been paid, CRA will require that all previous tax returns
and 2% on the excess over $200,000. Other acquisition years. This is different from rental losses, which cannot be be filed and all outstanding taxes, interest and penalties
costs may include inspection fees, appraisals and legal fees. carried forward by a non-resident. also be paid before they will issue the Certificate of Com-
pliance.
Harmonized Sales Tax (“HST”) of 12% will be charged on Municipal property taxes are due annually and you will be
chattels (furniture and fixtures) which are separately identi- required to pay that portion of the annual amount based upon After the end of the taxation year in which the property is
fied in the purchase agreement. British Columbia Social the number of days you own the property in the year of acqui- sold, the non-resident must file a T1 personal tax return to
Service Tax (commonly called Provincial Sales Tax or sition. report the part year business income and the gain on dis-
“PST”) was replaced by HST as of July 1, 2010. Please position of the property and calculate the actual gain and
refer to the HST section for more details. the final tax. In this calculation of the actual gain, the
Sale—Any gain on the disposition of business or personal non-resident can deduct all related selling expenses such
Business Income — The income from certain hotel proper- property in Canada will be subject to tax in Canada. as commissions, legal fees and accounting fees.
ties at Whistler (e.g. Westin Hotel, Hilton Whistler, Whis-
tler Village Inn & Suites, Delta Whistler Village Suites, This tax is levied in two stages. First there is a withholding tax In addition, the non-resident may be allowed “capital
Executive Suites Garibaldi Springs Resort) is treated as at the time of disposition and then a final calculation of tax as gains treatment” which means that only 1/2 of the gain
“business” income rather than “rental” income for Canadian reported in the T1 personal tax return which is due after year will be taxable. The taxable income will be subject to
tax purposes. This difference will have a significant impact end. progressive rates from 22% to 43% (for 2010) and if the
on non-resident investors. total tax is less that the withholding tax paid at the time of
The withholding tax is paid by filing a form T2062 and paying obtaining the Certificate of Compliance, the non-resident
In order for the income to be treated as business income, the a withholding tax of 25% (on the land portion) and up to will be entitled to a refund of the difference.
property manager must apply for approval from CRA for 50% (on the building portion) of the interim gain on sale.
the entire “hotel”. That is, the decision to apply for busi- The interim gain is calculated as the selling price less the cost It may be possible to defer the income tax on a capital
ness treatment is not up to each individual owner. Gener- for tax purposes. Once this form is accepted by CRA and the gain if another business property is acquired.
ally, this approval will only be given to properties which tax has been paid, CRA will issue a “Certificate of Compli-
are operated as hotels. ance” .
Once the hotel has received permission from CRA for the CRA is concerned that the non-resident may sell the property
income to be treated as business income, each individual and take the proceeds out of Canada without paying tax. CRA
owner must apply for an annual Regulation 805 Waiver. enforces the collection of this tax by transferring the obligation /0*'1/(+%$"23&)'0(4&,'*(.5'
This waiver should be submitted immediately after the clos- to pay tax from the non-resident vendor to the purchaser of the
ing date in the year of purchase. For subsequent years, it property. Unless the purchaser receives a signed declaration
must be submitted before December 31 of the year before that the vendor is a resident of Canada or receives the above- Generally, the HST rules are similar to the old GST rules.
the applicable year. mentioned Certificate of Compliance, the purchaser will be HST replaced GST in B.C. as of July 1, 2010, but GST
liable for withholding tax of 25% (or in some cases, up to still exists in some other provinces.
Gross room revenue is not subject to any withholding 50%) of the selling price.
tax. This is very different from rental revenue which is HST on real estate is very complex and depends on the
subject to a 25% withholding tax. Therefore all knowledgeable purchasers will request a Certifi- situation of the vendor and purchaser, the use of the prop-
cate of Compliance when purchasing property from a non- erty and the management. You must obtain professional
The non-resident is required to file a T1 personal tax re- resident. This procedure applies whether the purchaser is a advice before making any decisions regarding HST. HST
turn by April 30 of the following year, as any taxes pay- Canadian resident or not. In practice, the purchaser's lawyer of 12% is charged on the sale of commercial property and
able must be paid by that date. The taxable income will be will generally hold back 25 % (or in some cases, up to 50%) of the nightly rental of that property.
subject to progressive tax rates ranging from approxi- the entire purchase price until he receives the Certificate of
mately 22% to 43% (for 2010). Compliance. Purchase—A purchaser who is registered for HST can
claim a refund (Input Tax Credit – “ITC”) of HST paid on
A business income statement must be included with the T1. It currently takes about 12 to 16 weeks for CRA to process a the purchase of a commercial property. Therefore, most
Eligible expenses will include advertising, insurance, man- Certificate of Compliance. The application form T2062 may purchasers will register for HST. A property will be con-
agement fees, property taxes, repairs and maintenance, be filed prior to sale but must be filed within 10 days of clos- sidered a commercial property if it is used all or substan-
strata fees, utilities, cable, the interest portion of mortgage ing. We suggest that it be filed as early as possible. Penalties tially all (generally more than 90%) for short-term (e.g.
will be assessed if it is filed late. nightly) rentals.
Michael T. Y. Lam, Ltd.
604.872.8206 mike@lamlonishio.ca
mike@lamlonishio.ca (Ext 224) Lam Lo Nishio
Bernard Y. H. Lo, Ltd. Chartered Accountants *
Don T. Nishio, Ltd.
604.872.8539 bernard@lamlonishio.ca
bernard@lamlonishio.ca (Ext 225) An association of incorporated professionals
* 604.876.8893 don@lamlonishio.ca
don@lamlonishio.ca (Ext 226)
Tax Considerations for Non-Resident Individuals Investing

in Canadian Real Estate (producing Business Income)
Sept. 15, 2010
The income from certain properties at Whistler and Squamish (e.g. Westin Hotel, Hilton Whistler,
Whistler Village Inn & Suites, Delta Whistler Village Suites, Executive Suites Garibaldi Springs
Resort) is treated as “business” income rather than “rental” income for Canadian tax purposes.
This difference will have a significant impact on non-resident investors. In order for the income to
be treated as business income, the property manager must apply for approval from CRA for the
entire “hotel”. That is, the decision to apply for business treatment is not up to each individual
owner. Generally, this approval will only be given to properties which are operated as hotels.
Taxation upon acquisition (Property Transfer Tax) and annual property tax
1) Property Transfer Tax is payable at the time of purchase of real property. This tax is calculated at 1% on the
first $200,000 and 2% on the excess over $200,000. Other acquisition costs may include inspection fees,
appraisals and legal fees.
2) Municipal property taxes are due annually and a pro-rata portion will be payable based upon the number of days
that the property is owned in the year of acquisition. Thereafter, property taxes must be paid each year (e.g.
July 1 for Whistler) and arrangements should be made with the municipality to ensure they are paid on a timely
basis. The amount is based upon the assessed value and the “mill rate” set by the municipality. As a general
“rule of thumb”, annual property taxes are very approximately 0.5 to 1% of the value of a residential property.
There are two main classes for property tax purposes: residential and commercial. Property tax on commercial
property is significantly higher than residential. In Whistler, a reduction of property tax is available for the
personal use portion of commercial property (known as the STOCAP rules).
3) Harmonized Sales Tax (“HST”) of 12% will be charged on chattels (furniture and fixtures) which are separately
identified in the purchase agreement. British Columbia Social Service Tax (commonly called Provincial Sales
Tax or “PST”) was replaced by HST as of July 1, 2010. Please refer to the GST/HST section for more details.
Taxation of Business Income
1) Once the hotel has received permission from CRA for the income to be treated as business income, each
individual owner must apply for an annual update to the Regulation 805 Waiver. This waiver should be
submitted immediately after the closing date in the year of purchase (or by the 15th of the following month, at
the latest). For subsequent years, it must be submitted before December 31 of the year before the applicable
year. (i.e. for the 2011 taxation year, it must be submitted by Dec. 31, 2010). Some hotels require the
individual owners to submit the annual update and some hotels will do it for the owner. Some hotels will only
do it in certain years (e.g. not the year of acquisition but for subsequent years). CRA will send an approval for
the waiver within a few months of it being submitted.
659-G Moberly Road Vancouver B.C. Canada V5Z 4B2 t.604.872.8883 f.604.872.8889
info@lamlonishio.ca www.lamlonishio.ca
2) Gross room revenue is not subject to any withholding tax if the waiver is approved. This is very different
from rental revenue, which is subject to a 25% withholding tax.
3) The non-resident is required to file a T1 personal tax return and pay taxes by April 30 of the following year
if any taxes are payable. If no taxes are payable, the T1 must be filed by June 15. The taxable income will be
subject to progressive tax rates ranging from approximately 22% to 43% for 2010.
4) A business income statement must be included with the T1. Eligible expenses will include advertising,
insurance, management fees, property taxes, repairs, maintenance, strata fees, utilities and depreciation (referred
to as “Capital Cost Allowance” or “CCA” – see below), etc. Most of these are paid for by the hotel and are
automatically deducted from room revenues. In addition, expenses such as the interest expense portion of
mortgage payments and accounting fees, which are paid directly by the owner, are deductible. Some expenses
will also have to be prorated if there is personal use of the property.
5) In the calculation of taxable income, CCA may also be taken to reduce taxable income. The CCA rate on
buildings is 4% and 20% on furniture and fixtures.
6) Business losses can be carried back 3 years or forward 20 years. This is different from rental losses, which
cannot be carried back or forward by a non-resident. However, there are special “reasonable expectation of
profit” rules, which allow CRA to disallow any loss if it cannot be reasonably anticipated that a profit will result
within a reasonable period of time. The capital gain upon sale is not considered profit for the purpose of these
rules. The rules are not specific, but, for example, losses for 10 continuous years with no hope for profit would
likely be denied. On the other hand, losses for 3 or 4 years until the mortgage had been paid down and then
profits thereafter would likely be acceptable if audited by CRA.
7) Tax planning issues which should be discussed include ownership structure, capitalization of expenditures to
reduce tax or future gains, potential capitalization of interest expense, risks of borrowing outside Canada,
treatment of income as business income and other similar issues.
8) There is a relatively obscure rule regarding Canadian withholding tax on interest paid to a foreign bank
regarding the earning of interest income in Canada. If you are considering borrowing funds in your home
country to finance the purchase of a business property in Canada, please consult with a tax advisor.
Taxation on disposition
1) Any gain on the disposition of business or rental property in Canada will be subject to tax in Canada. This tax
is levied in two stages. First there is a withholding tax at the time of disposition and then a final calculation of
tax as reported in the T1 personal tax return which is due after year end.
2) The withholding tax is paid by filing a form T2062 and paying a withholding tax of 25% of the interim gain
on sale, plus up to 44% of recaptured CCA, if any. The interim gain is calculated as the selling price less the
cost for tax purposes. At this stage, commissions, legal fees and accounting fees are not deductible in the
calculation of the interim gain. Once this form is accepted by CRA and the tax has been paid, CRA will issue a
“Certificate of Compliance” (see attached “Example of Canadian Taxation upon Disposition of Canadian Real
Estate by Non-resident Individual”).
CRA is concerned that the non-resident may sell the property, take the proceeds out of Canada and never pay
any tax. It would be very difficult for CRA to collect tax from a non-resident who no longer has any assets in
Canada. Therefore, the way that CRA enforces the collection of this tax is to transfer the obligation to pay tax
from the non-resident vendor to the purchaser of the property. Unless the purchaser receives a signed
declaration that the vendor is a resident of Canada or receives the above-mentioned Certificate of Compliance,
the purchaser will be liable for withholding tax of 25% of the selling price (on the portion relating to land) and
potentially 50% of the portion of the selling price relating to the building (although this is not often demanded
by the purchaser’s lawyer) and the purchaser’s lawyer must remit this withholding tax to CRA. (Technically, if
CCA has been claimed and CCA is “recaptured” upon disposition, the withholding tax on the portion of the
gain relating to the building may be increased to 50%. However, the purchaser’s lawyers may demand 50%
withholding tax on the entire proceeds.) Therefore, all knowledgeable purchasers will request a Certificate of
Compliance when purchasing property from a non-resident. This procedure applies whether the purchaser is a
Canadian resident or not.
In practice, the purchaser's lawyer will generally hold back 25 % of the entire purchase price until they receive
the Certificate of Compliance. Technically, this tax must be remitted to CRA by the end of the month following
the month of closing. However, this requirement can be waived by obtaining a “Comfort Letter” from CRA. It
currently takes about 12 to 16 weeks for CRA to process a Certificate of Compliance. The form T2062 may be
filed before, and must be filed within 10 days of, closing and we suggest that it be filed as early as possible.
Penalties will be assessed if it is filed later than 10 days after closing.
In the Certificate application form T2062, CRA requests information regarding the income earned from the
property during the period of ownership. If income has been earned from the property but taxes have not been
paid, CRA will require that all the previous tax returns be filed and all outstanding taxes, interest and penalties
also be paid before they will issue the Certificate of Compliance.
After the end of the taxation year in which the property is sold, the non-resident must file a T1 personal tax
return to report the part year business income and the disposition of the property and calculate the actual gain
and the final tax. In this calculation of the actual gain, he can deduct all related selling expenses such as
commissions, legal fees and accounting fees. In addition, depending on the circumstances, he may be allowed
“capital gains treatment” which means that only 1/2 of the gain will be taxable. The taxable income will be
subject to progressive rates from 22% to 43% (for 2009) and if the total tax is less that the withholding tax paid
at the time of obtaining the Certificate of Compliance, the non-resident will be entitled to a refund of the
difference. Please refer to the attached “Example of Canadian Taxation upon Disposition of Canadian Real
Estate by Non-resident Individual”.
4) Special rules which only apply to business property (i.e. not rental property) are the replacement property rules
(e.g. similar to a US tax “Section 1031 tax deferred exchange”). Generally, if a business property is sold and
another business property is purchased within the following taxation year, the tax on the gain on sale of the first
property may be deferred until the sale of the second property. Please ask us if you think this may apply to you.
HARMONIZED SALES TAX (“HST”) [formerly known as GST (“Goods and Services Tax”)]
Generally, the HST rules are similar to the old GST rules. HST replaced GST in B.C. as of July 1, 2010, but GST
still exists in some other provinces.
HST on real property is very complex and depends on the situation of the vendor, the situation of the purchaser, the
current and intended use of the unit (i.e. residential, personal or commercial), the current and intended use of the
entire building, the type of property (e.g. new residential complex, used residential complex, hotel or similar
property etc.), the property manager and the management contract. The following are some general guidelines but
you must obtain professional advice before making any decisions regarding HST. These comments are written from
a non-resident purchaser’s point of view.
HST of 12% is charged on the sale of taxable supplies which are used in Canada. Taxable supplies will generally
include commercial property (i.e. property rented on a nightly basis) and the rental of rooms on a nightly basis.
Acquisition of property:
A purchaser who is registered for HST can claim a refund (Input Tax Credit – “ITC”) of the HST paid on the
purchase of a commercial property. Therefore, most purchasers will register for HST. A property will be
considered a commercial property if it is used all or substantially all (generally considered to be more than 90%) for
short-term (e.g. nightly) rentals. In the most common scenario, a registered vendor sells a commercial property to a
registered purchaser. If the purchaser registers for HST before the “closing” (possession) date, the HST will usually
be waived on the purchase. If the purchaser is not registered by the closing date, the HST cannot be waived (i.e. will
have to be paid). However, the purchaser can register at a later date and claim the ITC on their first HST return.
In order to claim the full ITC, the property must be used at least 90% of the time for nightly rentals. If the property
is used between 50 and 90% for rental purposes, the ITC must be prorated for the amount of personal use. If the
property is used more than 50% for personal use, neither the waiver of HST nor an ITC can be claimed. This also
applies to HST that was waived on the purchase of property. The HST may be required to be fully or partially
repaid depending on the personal use percentage.
The calculation of the personal use percentage is very complex and depends on many factors, including personal use
days, days rented, vacancy, occupancy, seasonal use, availability, intention, ease of access and other similar factors.
A registered purchaser can also claim ITCs for the HST paid on acquisition fees (e.g. inspection, appraisal and legal)
and the purchase of furniture, fixtures and improvements.
The HST will not be applicable to the purchase of a “used residential” home no matter how it will be used. This is
the same rule as the old GST system.
Change of use:
There are special rules for the full or partial change of use of the property. These are generally not applicable to a
hotel property as the personal use is limited by contract.
Nightly rentals:
HST must be charged on business revenue earned on a nightly basis. Generally speaking, HST charged and
collected must be remitted to CRA and HST paid on purchases and expenses can be claimed as a refund by HST
registrants.
The property manager will charge and collect the HST on the nightly rentals. The property manager will then either
remit the HST collected directly to CRA monthly, or forward the HST to the owner. The property manager may
require the owner to sign a special election in order to remit the HST directly to CRA.
If the owner receives the HST from the property manager, they must pay it to CRA when the annual HST return is
filed. This is called HST Payable.
HST return:
Generally, the HST return is prepared and filed annually, on a calendar basis. The deadline for filing is March 31 of
the following year.
If the HST collected by the property manager is sent to the owner, this “HST payable” must be reported and paid by
the owner. If the property manager remits the HST collected directly to CRA, there is no HST Payable to report on
the HST return.
The registered owner may also claim ITCs for the HST included in expenses paid (e.g. repairs, maintenance,
management fees, strata fees, utilities, etc.). Any ITC must be prorated for personal use.
Sale:
HST must be charged on the sale of a commercial property. However, if the purchaser is also registered and will use
the property for commercial purposes (e.g. nightly rental), the vendor may agree to waive the HST.
This memo is of a general nature only and professional advice should be sought before
completing any transaction.
We can help you
We can assist the non-resident and the Canadian property manager as noted in our pamphlet entitled “Services for
Non-resident Individuals Investing in Canadian Real Estate”. In order to provide you with the services noted above,
we will ask that you complete our Questionnaire.
Please contact us if you would like either of the above.
Please note that we also have additional pamphlets regarding nightly rental producing rental income, monthly rental
and ownership without rent.
Contact
For further details or questions, please contact Don Nishio (in English or Japanese), Mike Lam (in Cantonese,
Mandarin or English), Bernard Lo (in Cantonese or English).
659-G Moberly Road, Vancouver, B.C., Canada, V5Z 4B2

Fax: 604-872-8889, Telephone: 604-872-8883, E-mail: don@lamlonishio.ca, mike@lamlonishio.ca, or
bernard@lamlonishio.ca. Web: www.lamlonishio.ca
2f\a0\a-\b\RETaxwithExampleBusiness
in Canadian Rental Real Estate
Example Calculation
Sept. 14, 2010
Example:
File T1
Business Revenue $ 40,000
Expenses
Advertising (eg. TW) 1,000
Insurance 500
Interest 8,000
Management Fee 14,000
Property Tax 3,500
Repairs and Maintenance 4,000
Professional Fees 700
Utilities 1,000
32,700
Net Income before Capital 7,300

Capital Cost Allowance (optional) (4,000)
Net Income 3,300
Income Tax (eg. Net Income x 22%) 726
Notes:
1) No tax is withheld.
1operman/2f-/a-/NRInvestEgWh
Example of Canadian Taxation
upon Disposition of Canadian Real Estate by Non-resident Individual
Sept. 15, 2010
Assumptions:
Purchase (Note 1)
Purchase price $ 393,000
Property transfer tax 6,000
Legal fees on purchase 1,000
Tax Cost ("Adjusted cost base" - "ACB") 400,000
Sale (Note 1)
Selling price 600,000
Commission for selling 22,000
Legal and accounting fees for selling 4,000
Mortgage loan balance at time of sale 200,000
Withholding tax at time of disposition to obtain Certificate of Compliance ("CC")
Selling price $ 600,000

less: ACB (400,000)
Interim capital gain 200,000
Withholding tax rate 25%
Withholding tax payable (Note 2) 50,000
Cash flow on sale

less: Commission 22,000
Legal and accounting fee 4,000
Mortgage payout 200,000
Holdback by lawyer at 25% on
600,000 150,000
(376,000)
Net payment to non-resident ("NR") owner on closing 224,000
Holdback by lawyer 150,000

less: Withholding tax paid for CC (see above) (50,000)
Net payment to NR owner upon receipt of CC 100,000
Final tax upon filing T1 personal tax return

less: ACB 400,000
Commission 22,000
(426,000)
Capital gain 174,000
Taxable Capital gain - 50% of capital gain 87,000
Final income tax (estimated at approximately 32%) (Notes 3 &
4) 28,000
Less: Withholding tax paid for CC (see
above) (50,000)
Tax refund to NR owner - summer of the following

year $ 22,000
Notes:
1 Assume that all furniture and fixtures are included in the purchase and selling prices.
2 The lawyer will generally hold back $150,000 (25% of $600,000) until CC is received, but
could be more than 25% under some circumstances.
3 The final income tax will be calculated at progressive rates from 22 to 43% (for 2010).
4 The calculation of the final income tax assumes that there is no recapture of CCA.
5 Please refer to our pamphlet "Tax Consideration for Non-Resident Individuals Investing
in Canadian Rental Real Estate".
operman/2f- /a- / EgTaxOnSale
Our Services
Income Tax
Acquisition
Advising with respect to appropriate ownership structure
Advising with respect to advantages and disadvantages of
filing an NR6
Calculating the Adjusted Cost Base of land, building and
furniture
Annual
Preparing and filing the NR6 and estimated income
statement
Coordinating with property manager regarding
withholding taxes
Capitalizing interest and / or other expenditures to the cost
of property
Canadian
preparing rental income statement
Tax for Non-residents
Coordinating and replying to requests for information and
other review or audit requests by Canada Revenue Agency
Investing in
(“CRA”) Canadian Real Estate
Disposition
Estimating and explaining income tax on capital gain. (Rented Monthly)
Preparing the request for Certificates of Compliance and
Comfort Letter, arranging payment of estimated taxes to
CRA and delivering the Certificates to lawyer.
Preparing and filing of T1 personal tax return to report
gain on sale and apply for income tax refund, if applicable
Tax planning issues which should be discussed include

ownership structure, capitalization of expenditures to
reduce tax on future gains, potential capitalization of
interest expense, risks of borrowing outside Canada and
other issues. November 16, 2010 Providing You
2f/a2/NRBrochureMonthlyDTN
with Peace of Mind
on business income, nightly rentals or buying with no
Don Nishio CA
Tel: 604-872-8883 Fax: 604-872-8889
don@lamlonishio.ca
www. lamlonishio.ca
to as “Capital Cost Allowance” or “CCA”) may also be taken Once this form is accepted by CRA and the tax has been
Income and Transfer Tax to reduce taxable income. The CCA rate on buildings is 4%. paid, CRA will issue a “ Certificate of Compliance”.
If the property is sold for a gain, previously deducted CCA
Purchase will be brought back into income at the time of sale. CRA is concerned that the non-resident may sell the prop-
Property Transfer Tax is payable at the time of purchase. erty, take the proceeds out of Canada and never pay any tax.
This tax is calculated as 1% on the first $200,000 and 2% A third option is available before the commencement of a It would be very difficult for CRA to collect tax from a
on the excess over $200,000. Other acquisition costs may taxation year. If the non-resident has a Canadian "agent" for non-resident who no longer has any assets in Canada. The
include inspection fees, appraisals and legal fees. income tax purposes (the management company may become way that CRA enforces the collection of this tax is to trans-
the agent), the non-resident and the agent may elect to file a T1 fer the obligation to pay tax from the non-resident vendor to
The Harmonized Sales Tax (“HST”) of 12% will be tax return by filing form NR6 before the beginning of the the purchaser of the property. Unless the purchaser re-
charged on chattels (furniture and fixtures) which are sepa- taxation year. ceives a signed declaration that the vendor is a resident of
rately identified in the purchase agreement. British Colum- Canada or receives the above-mentioned Certificate of
bia Social Service Tax (commonly called Provincial Sales In this form, they will estimate net income for the year and are Compliance, the purchaser will be liable for withholding tax
Tax or “PST”) was replaced by HST as of July 1, 2010. only required to withhold 25% of estimated net income. The of 25% (or in some cases, up to 50%) of the selling price.
The HST of 12% will generally be charged on the purchase non-resident must then file a T1 by June 30 of the year follow-
of a newly built property. This HST will become part of ing the taxation year. If the T1 is not filed by June 30, a pen- Therefore all knowledgeable purchasers will request a Cer-
the cost. No HST will be charged on the sale of a used alty of 25% of gross rental revenue will be assessed against tificate of Compliance when purchasing property from a
residential property, which includes most homes, town- the agent. non-resident. This procedure applies whether the purchaser
houses or condos which are rented on a monthly basis. is a Canadian resident or not. In practice, the purchaser's
The purchaser cannot and should not register for HST. This third option is usually beneficial from a cash flow point of lawyer will generally hold back 25% (or in some cases,
view if there are any rental expenses. The total taxes will be 50%) of the entire purchase price until he receives the Cer-
Monthly Rental the same as those in the second option mentioned above, but tificate of Compliance.
the non-resident does not have to wait for a refund.
Gross rental revenue is subject to a withholding tax of It currently takes about 12 to 16 weeks for CRA to process
25%. The Canadian property manager must withhold this For non-residents, rental losses cannot be carried back or for- a Certificate of Compliance. The form T2062 may be filed
tax and remit it to CRA (“Canada Revenue Agency”). If ward to other taxation years. prior to sale but must be filed within 10 days of closing.
the non-resident takes no further action, this will be the We suggest that it be filed as early as possible. Penalties
final tax. If withholding tax is not remitted, the property Municipal property taxes are due annually and a portion will will be assessed if it is filed later than 10 days after closing.
manager will be required to pay a penalty of 25% of gross be payable based upon the number of days the property is
rental revenues plus interest. owned in the year of acquisition. Thereafter, it is payable on In the Certificate application form T2062, CRA requests
an annual basis. The amount is based upon the assessed value information regarding the rental of the property during the
If taxes have erroneously not been withheld and remitted to and the “mill rate” set by the municipality. period of ownership. If the property has been rented but
CRA, the non-resident must file a T1 tax return each year, withholding taxes have not been paid, CRA will require that
even if there are rental losses. If the property is rented on a nightly basis, as opposed to all the previous tax returns be filed and all outstanding
monthly, there are implications for both income tax and HST, taxes, interest and penalties also be paid before they will
The non-resident has a second option after the end of the on the purchase, rental and sale. Please contact us if this may issue the Certificate of Compliance.!
taxation year. He may calculate taxable income based on be of relevance to you.
net rental income (after deducting related expenses such as After the end of the taxation year in which the property is
interest, property taxes, management fees, maintenance,
repairs, accounting fees, etc.) and file a T1 personal tax
Sale sold, the non-resident may file a T1 personal tax return to
report the disposition of the property and calculate the ac-
return. The taxable income will be subject to progressive Any gain on the disposition of rental property in Canada will tual gain and the final tax. In this calculation of the actual
tax rates ranging from approximately 22% to 43% (for be subject to tax in Canada. This tax is levied in two stages.
gain, the non-resident can deduct all related selling ex-
2010). First, there is a withholding tax at the time of disposition and penses such as commissions, legal and accounting fees.
then a final calculation of tax as reported in the T1 personal tax
If the income tax calculated in this manner is less than the return which is due after year end. In addition, the non-resident may be allowed “capital gains
tax originally withheld, the non-resident will receive a treatment” which means that only 1/2 of the gain will be
refund of the difference. This tax return may be filed any The withholding tax is paid by filing a form T2062 and paying taxable. The taxable income will be subject to progressive
time up to two years after the end of the applicable taxa- a withholding tax of 25% (on the land portion) and up to
rates from 22% to 43% (for 2010) and if the total tax will
tion year (e.g. for the 2010 taxation year, it may be filed up 50% (on the building portion) of the interim gain on sale. be less that the withholding tax paid at the time of obtaining
to December 31, 2012). This option is normally beneficial The interim gain is calculated as the selling price less the cost
the Certificate of Compliance, the non-resident will be enti-
and will usually result in a refund. for tax purposes. At this stage, commission expenses, legal tled to a refund of the difference.
fees and accounting fees are not deductible in the calculation
In the calculation of taxable income, depreciation (referred of the interim gain.
Don T. Nishio, Ltd.

in Canadian Rental Real Estate (rented monthly)
Sept 20, 2010
1) Property Transfer Tax is payable at the time of purchase of real property. This tax is calculated at 1% on the
2) Municipal property taxes are due annually and a pro-rata portion will be payable based upon the number of
days that the property is owned in the year of acquisition. Thereafter, property taxes must be paid each year
(e.g. Feb. 2 and July 2 for Vancouver) and arrangements should be made with the municipality to ensure they
are paid on a timely basis. The amount is based upon the assessed value and the “mill rate” set by the
municipality. As a general “rule of thumb”, annual property taxes are approximately 0.4 to 1% of the value of
the property.
3) The Harmonized Sales Tax (“HST”) of 12% will be charged on chattels (furniture and fixtures) which are
separately identified in the purchase agreement. British Columbia Social Service Tax (commonly called
Provincial Sales Tax or “PST”) was replaced by HST as of July 1, 2010. The HST of 12% will generally be
charged on the purchase of a newly built property. This HST will become part of the cost. However, a portion
of the HST paid may be able to be claimed, under certain circumstances, in accordance with the New
Residential Rental Property Rebate for a property which is rented on a long-term basis. No HST will be
charged on the sale of a used residential property, which includes most homes, townhouses or condos which are
rented on a monthly basis. The purchaser cannot and should not register for HST.
4) The HST will not be applicable to the purchase of a used residential home no matter how it will be used.
Taxation of Rental Income
1) Gross rental revenue is subject to a withholding tax of 25%. The tenant or Canadian agent, if one exists,
must withhold this tax and remit it to CRA (“Canada Revenue Agency”) monthly. If the non-resident takes no
further action (i.e. see “option 1” in the attached schedule, “Example Calculations of Three Options”), this will
be the final tax. The penalty for not withholding is 10% of the amount that should have been withheld. In
addition, interest will be charged at CRA’s “prescribed rate” (currently 5%). If no withholding tax has ever
been remitted and if the two year period explained in 2) below has passed, the agent (or the tenant if there is no
agent) will be required to pay a penalty of 25% of gross rental revenues plus interest. CRA will assess the
agent (or the tenant if there is no agent), but if the property is still owned, the non-resident will be ultimately
responsible.
2) The non-resident has a second option after the end of the taxation year. They may calculate taxable income
based on net rental income (after deducting related expenses such as interest, property taxes, management
fees, maintenance, repairs, strata fees, insurance, accounting fees, etc.) and elect to file a T1 personal tax
return. The taxable income will be subject to progressive tax rates ranging from approximately 22% to
43% for 2010. If the income tax calculated in this manner is less than the tax originally withheld, the non-
resident will receive a refund for the difference. This tax return may be filed any time up to two years after
the end of the applicable taxation year (e.g. for the 2010 taxation year, it may be filed up to December 31,
2012). This option is normally beneficial and will result in a refund as rental expenses will usually cause
income taxes to be less than the taxes withheld (25% of gross revenue).
3) In the calculation of taxable income, depreciation (referred to as “Capital Cost Allowance” or “CCA”) may also
be taken to reduce taxable income. The CCA rate on buildings is 4%. However, an individual who is
contemplating moving into the property in the future (e.g. retire to Canada) should normally not take any CCA
during the period that he is renting it. This is to avoid deemed disposition rules which result from a change of
use. If the property is sold for a gain, previously deducted CCA will be brought back into income at the time of
sale.
4) A third option is available before the commencement of a taxation year. If the non-resident has a Canadian
"agent" for income tax purposes (the tenant or management company may become the agent), the non-resident
and the agent may elect to file a T1 tax return by filing form NR6 before the beginning of the taxation year.
5) In the NR6 form, the non-resident and property manager will estimate net income for the year and are only
required to withhold 25% of estimated net income. The non-resident must then file a T1 by June 30 of the
year following the taxation year. If the T1 is not filed by June 30, a penalty of 25% of gross rental revenue
will be assessed against the agent. This third option is usually beneficial from a cash flow point of view if there
are any rental expenses. The total taxes will be the same as those in the second option mentioned above, but the
non-resident does not have to wait for a refund. Again, any difference between actual taxes calculated on the
T1 and taxes withheld during the year will be payable or refundable.
6) For non-residents, rental losses cannot be carried back or forward to other taxation years.
7) A form NR4 must be filed by the Canadian agent (or tenant) for each taxation year by March 31 of the
following year to report total rental revenue and the amount of taxes withheld. In order for the agent to remit
taxes and prepare this form, they must apply to CRA for a “non-resident remittance number”.
9) This pamphlet only addresses the tax implications of monthly rentals. If the property is rented on a nightly
basis, there are implications for both income tax and HST on the purchase, rental and sale of the property.
Please contact us if you feel this may be of relevance to you.
10) Some rental properties, which are operated as a hotel, may qualify for treatment as “business income” as
opposed to “rental income”. This will be determined by the management company as they must apply to CRA
for authorization for income to be treated as business income. The tax treatment of business income is different
than rental income and there are several advantages for non-residents to have the income treated as business
income. Please contact us if you feel this may be of relevance to you.
11) HST should not be charged on monthly rentals.
1) Any gain on the disposition of rental property in Canada will be subject to tax in Canada. This tax is levied in
two stages. First, there is a withholding tax at the time of disposition and then a final calculation of tax as
reported in the T1 personal tax return which is due after year end.
“Certificate of Compliance” (see attached “Example of Canadian Taxation upon Disposition of Canadian
Real Estate by Non-resident Individual”).
gain relating to the building may be increased to 50%. However, the purchaser’s lawyer may demand 50%
withholding tax on the entire proceeds.) Therefore all knowledgeable purchasers will request a Certificate of
the Certificate of Compliance. Technically, this tax must be remitted to CRA by the end of the month
following the month of closing. However, this requirement can be waived by obtaining a “Comfort Letter”
from CRA. It currently takes about 12 to 16 weeks for CRA to process a Certificate of Compliance. The form
T2062 may be filed before, and must be filed within 10 days of, closing and we suggest that it be filed as early
as possible. Penalties will be assessed if it is filed later than 10 days after closing.
In the Certificate application form T2062, CRA requests information regarding the rental of the property during
the period of ownership. If the property has been rented but withholding taxes have not been paid, CRA will
require that all the previous tax returns be filed and all outstanding taxes, interest and penalties also be paid
before they will issue the Certificate of Compliance.
3) After the end of the taxation year in which the property is sold, the non-resident may file a T1 personal tax
return to report the disposition of the property and calculate the actual gain and the final tax. In this calculation
of the actual gain, they can deduct all related selling expenses such as commissions and legal and accounting
fees. In addition, depending on the circumstances, they may be allowed “capital gains treatment” which
means that only 1/2 of the gain will be taxable. The taxable income will be subject to progressive rates from
22% to 43% (for 2010) and if the total tax is less that the withholding tax paid at the time of obtaining the
Certificate of Compliance, the non-resident will be entitled to a refund of the difference. Please refer to the
attached “Example of Canadian Taxation upon Disposition of Canadian Real Estate by Non-resident
Individual”.
4) There is no tax deferral available if a replacement property is purchased (e.g. similar to a US tax “Section 1031
tax deferred exchange”). Such deferral is only available for a “business” property, under certain conditions.
5) HST should not be charged on the sale of a used residential property which was rented on a monthly basis.
Change of use
There are special very complex rules for the full or partial change of use of the property.
For income tax purposes, there will be a deemed disposition, and re-acquisition, at the fair market value if the
property is changed from revenue producing (nightly or monthly rentals) to not producing revenue, or from not
producing revenue to revenue producing. This could result in income taxes being payable on any increase in value,
even though the property has not been sold. It may be possible to avoid the deemed disposition by doing a special
election.
There may be additional complications for a mixed-use property (e.g. part-year nightly rentals, part-year monthly
rentals and personal use). Complications could also result, for example, from renting a suite in the home.
Professional advice should be obtained for any proposed change of use.
We can help you
We can assist the non-resident and the Canadian agent or tenant as noted in our pamphlet entitled “Services for
we ask that you complete our Questionnaire.
Please note that we also have additional pamphlets regarding nightly rental producing rental income, nightly rental
producing business income and ownership without rent.
Contact
For further details or questions, please contact Don Nishio (in English or Japanese), Mike Lam (Cantonese or
Mandarin), Bernard Lo (Cantonese).

2f-nr-inv\a-pamphlet\RETaxMonthly
in Canadian Rental Real Estate (rented monthly)
Example Calculations of the Three Options
Sept 20, 2010
Examples: OPTIONS
1 2 3
File NR6 &
File T1 T1
Rental Revenue $ 15,000 $ 15,000 $ 15,000
Expenses
Advertising 100 100 100
Insurance 300 300 300
Interest 7,000 7,000 7,000
Management Fee 1,200 1,200 1,200
Property Tax 1,800 1,800 1,800
Repairs and Maintenance 3,000 3,000 3,000
Professional Fees 100 400 700
Utilities 500 500 500
14,000 14,300 14,600
Net Income before Capital 1,000 700 400 *Note 1

Capital Cost Allowance (optional) 0 (700) (400)
Net Income 1,000 0 0
Income Tax (eg. Net Income x 25%) 0 0 0
Tax withheld ($15,000 x 25%) $ 3,750 $ 3,750 $ 100 *Note 2
Final Income Tax $ 3,750 $ - $ -

Income Tax (Refund) 0 (3,750) (100)
Net cash inflow after tax (refund) $ (2,750) $ 700 $ 400
Notes:
1) Please refer to our pamphlet "Tax Considerations for Non-Resident Individuals Investing in Canadian Rental
Real Estate" for an explanation of the above example calculations
2) Withholding tax per NR6 equals Net Income before CCA times 25%.
2f-/a-/NRInvestEgMonthly
Sept 20, 2010
Assumptions:
Purchase (Note 1)
Sale (Note 1)

less: ACB (400,000)
Cash flow on sale

Holdback by lawyer at 25% on 600,000 150,000
(376,000)


less: ACB 400,000
Commission 22,000
(426,000)
Final income tax (estimated at approximately 32%) (Notes 3 & 4) 28,000
Less: Withholding tax paid for CC (see above) (50,000)
Tax refund to NR owner - summer of the following year $ 22,000
Notes:
Our Services
the purchase of a commercial property. Therefore, most INCOME TAX
purchasers will register for HST. A property will be consid- Acquisition
ered a commercial property if it is used all or substantially Advising with respect to appropriate ownership structure
all (generally more than 90%) for short-term (e.g. nightly) Coordinating with your realtor, lawyer and property
rentals. manager
Advising with respect to advantages and disadvantages of NR6
In the most common scenario, a registered vendor sells a Calculating the Adjusted Cost Base of land, building and
furniture
commercial property to a registered purchaser. If the pur-
Annual
chaser registers for HST before the “closing” date, the HST
Preparing and filing the NR6 and estimated income statement
will usually be waived on the purchase. If the purchaser is Coordinating with property manager regarding withholding
not registered by the closing date, the HST cannot be taxes
waived, however, the purchaser can register at a later date Capitalizing interest and / or other expenditures to the cost of
and claim the ITC on their first HST return. property
In order to claim the full ITC, the property must be used at preparing rental income statement
least 90% of the time for nightly rentals. If the property is Coordinating and replying to requests for information and other
used between 50 and 90% for rental purposes, the ITC must
be prorated for the amount of commercial use. If the prop-
review or audit requests by Canada Revenue Agency (“CRA”)
Disposition
Canadian
erty is used more than 50% for personal use, neither the
waiver of HST nor an ITC can be claimed.
Estimating and explaining income tax on capital gain
Preparing the request for Certificates of Compliance and Com- Tax for Non-residents
The calculation of the personal use percentage is very com-
fort Letter, and arranging payment of estimated taxes to CRA
and delivering the Certificates of Compliance to lawyer Investing in
plex and depends on many factors, including personal use
days, days rented, vacancy, occupancy, seasonal use, avail-
Preparing and filing the T1 personal tax return to report gain on
sale and apply for income tax refund, if applicable Canadian Real Estate
ability, intention, ease of access and other similar factors. HST
Acquisition
A registered purchaser can also claim ITCs for the HST paid Advising with respect to HST implications on purchase and (Rented Nightly)
on acquisition fees (e.g. inspection, appraisal and legal) and operations of commercial rental property (Producing “rental” income)
the purchase of furniture, fixtures and improvements. Registering for HST with CRA
Coordinating with property manager regarding payment of HST
Change of use - There are special very complex rules for on rental revenues
the full or partial change of use of the property, for example, Annual
from residential to commercial or vice versa. There may be Calculating, preparing and filing the annual HST return,
additional complications for a mixed-use property. including application for refund
Disposition
Preparing and filing the final HST return
Nightly rentals - HST must be charged on nightly rentals. If
Cancelling of HST
there is a property manager, they will generally charge and
collect the HST on the nightly rentals. The property man- Tax planning issues which should be discussed include Providing You
ager will either remit the HST collected directly to CRA ownership structure, capitalization of expenditures to reduce tax
monthly, or forward the HST to the owner. If the owner on future gains, potential capitalization of interest expense, risks with Peace of Mind
receives the HST from the property manager, he must pay it of borrowing outside Canada, and other issues.
2f/a2/NRBrochureNightly August 25, 2010
to CRA when he files the annual HST return.
Sale - HST must be charged on the sale of a commercial For more detailed pamphlets, questions, or information
property. on business income, monthly rentals or buying with no
Don Nishio CA
Tel: 604-872-8883 Fax: 604-872-8889
don@lamlonishio.ca www. lamlonishio.ca
!"#$%&'(")'*+(",-&+'*(.!
the T1 is not filed by June 30, a penalty of 25% of gross will generally hold back 25 % (or in some cases, up to
Purchase—Property Transfer Tax is payable at the time of rental revenue will be assessed against the agent. 50%) of the entire purchase price until they receive the
purchase. This tax is calculated at 1% on the first $200,000 Certificate of Compliance.
and 2% on the excess over $200,000. Other acquisition This third option is usually beneficial from a cash flow point of
costs may include inspection fees, appraisals and legal fees. view. However, the total taxes will be the same as those in the It currently takes about 12 to 16 weeks for CRA to proc-
second option mentioned above, but the non-resident does not ess a Certificate of Compliance. The application form
Harmonized Sales Tax (“HST”) of 12% will be charged on have to wait for a refund. T2062 may be filed before, and must be filed within 10
chattels (furniture and fixtures) which are separately identi- days of closing and we suggest that it be filed as early as
fied in the purchase agreement. British Columbia Social For non-residents, rental losses cannot be carried back or for- possible. Penalties will be assessed if it is filed late.
Service Tax (commonly called Provincial Sales Tax or ward to other taxation years.
“PST”) was replaced by HST as of July 1, 2010. Please In the Certificate application form T2062, CRA requests
refer to the HST section for more details. Municipal property taxes are due annually and a portion will information regarding the rental of the property during the
be payable based upon the number of days the property is period of ownership. If the property has been rented but
owned in the year of acquisition. The amount is based upon withholding taxes have not been paid, CRA will require
Nightly Rental—Gross rental revenue is subject to a
the assessed value and the “mill rate” set by the municipality. that all previous tax returns be filed and all outstanding
withholding tax of 25%. The property manager must
taxes, interest and penalties also be paid before they will
withhold this tax and remit it to CRA (“Canada Revenue
Some rental properties, which are operated as a hotel, may issue the Certificate.
Agency”). If the non-resident takes no further action this
qualify for treatment as “business income” as opposed to
will be the final tax. If withholding tax is not remitted, the
“rental income”. This is determined by the management com- After the end of the taxation year in which the property is
property manager will be required to pay a penalty of 25%
pany as they must apply to CRA for authorization. Please sold, the non-resident may file a T1 personal tax return to
of gross rental revenues plus interest.
contact us if this may be of relevance to you. report the disposition of the property and calculate the
actual gain and the final tax. In this calculation of the
The non-resident has a second option after the end of the
actual gain, he can deduct all related selling expenses
taxation year. He may calculate taxable income based on
such as commissions, legal fees and accounting fees.
net rental income (after deducting expenses such as inter- Sale—Any gain on the disposition of rental property in Canada
est, property taxes, management fees, maintenance, repairs, will be subject to tax in Canada. This tax is levied in two
In addition, the non-resident may be allowed “capital
accounting fees, etc.) and file a T1 personal tax return. stages. First there is a withholding tax at the time of disposition
gains treatment” which means that only 1/2 of the gain
The taxable income will be subject to progressive tax rates and then a final calculation of tax as reported in the T1 personal
will be taxable. The taxable income will be subject to
ranging from approximately 22% to 43% (for 2010). tax return which is due after year end.
progressive rates from 22% to 43% (for 2010) and if the
total tax is less that the withholding tax paid at the time of
If the income tax calculated in this manner is less than the The withholding tax is paid by filing a form T2062 and paying
obtaining the Certificate of Compliance, the non-resident
tax originally withheld, the non-resident will receive a re- a withholding tax of 25% (on the land portion) and up to
will be entitled to a refund of the difference.
fund of the difference. This tax return may be filed any 50% (on the building portion) of the interim gain on sale.
time up to two years after the end of the applicable taxa- The interim gain is calculated as the selling price less the cost
tion year (e.g. for 2010, it may be filed up to Dec. 31, for tax purposes. Once this form is accepted by CRA and the
2012). This option is normally beneficial. tax has been paid, CRA will issue a “Certificate of Compli-
ance”.
In the calculation of taxable income, depreciation (referred HST (Harmonized Sales Tax)
to as “Capital Cost Allowance” or “CCA”) may also be CRA is concerned that the non-resident may sell the property
taken to reduce taxable income. The CCA rate on buildings and take the proceeds out of Canada without paying tax. CRA Generally, the HST rules are similar to the old GST rules.
is 4%. If the property is sold for a gain, previously deducted enforces the collection of this tax by transferring the obligation HST replaced GST in B.C. as of July 1, 2010, but GST
CCA will be brought back into income at the time of sale. to pay tax from the non-resident vendor to the purchaser of the still exists in some other provinces.
property. Unless the purchaser receives a signed declaration
A third option is available before the commencement of a that the vendor is a resident of Canada or receives the above- HST on real estate is very complex and depends on the
taxation year. If the non-resident has a Canadian "agent" mentioned Certificate of Compliance, the purchaser will be situation of the vendor and purchaser, the use of the prop-
for income tax purposes (e.g. the management company), liable for withholding tax of 25% (or in some cases, up to erty and the management. You must obtain professional
the non-resident and the agent may elect to file a T1 tax 50%) of the selling price. advice before making any decisions regarding HST. HST
return by filing form NR6 before the beginning of the of 12% is charged on the sale of commercial property and
taxation year. In this form, they will estimate net income Therefore all knowledgeable purchasers will request a Certifi- the nightly rental of that property.
for the coming year and are only required to withhold 25% cate of Compliance when purchasing property from a non-
of estimated net income. The non-resident must then file a resident. This procedure applies whether the purchaser is a Purchase - A purchaser who is registered for HST can
T1 by June 30 of the year following the taxation year. If Canadian resident or not. In practice, the purchaser's lawyer claim a refund (Input Tax Credit – “ITC”) of HST paid on
Don T. Nishio, Ltd.

in Canadian Rental Real Estate (rented nightly)
Aug. 25, 2010
1) Property Transfer Tax is payable at the time of purchase of real property. This tax is calculated as 1% on the
(e.g. July 1 for Whistler) and arrangements should be made with the municipality to ensure they are paid on a
timely basis. The amount is based upon the assessed value and the “mill rate” set by the municipality. As a
general “rule of thumb”, annual property taxes are approximately 0.5 to 1% of the value of the residential
property. There are two main classes for property tax purposes: residential and commercial. Property tax on
commercial property is significantly higher than residential. In Whistler, a reduction of property tax is
available for the personal use portion of commercial property (known as the STOCAP rules).
3) Harmonized Sales Tax (“HST”) of 12% will be charged on chattels (furniture and fixtures) which are separately
identified in the purchase agreement. British Columbia Social Service Tax (commonly called Provincial Sales
Tax or “PST”) was replaced by HST as of July 1, 2010. Please refer to the GST/HST section for more details.
Taxation of Rental Property Income
1) Gross rental revenue is subject to a withholding tax of 25%. The tenant or Canadian agent, if one exists,
must withhold this tax and remit it to CRA (“Canada Revenue Agency”) monthly. If the non-resident takes no
further action (i.e. see “option 1” in the attached schedule, “Example Calculations of Three Options”), this will
be the final tax. The penalty for not withholding is 10% of the amount that should have been withheld. In
addition, interest will be charged at CRA’s “prescribed rate” (currently 5%). If no withholding tax has ever
been remitted and if the two year period explained in 2) below has passed, the agent (or the tenant if there is no
agent) will be required to pay a penalty of 25% of gross rental revenues plus interest. CRA will assess the
agent (or the tenant if there is no agent), but if the property is still owned, the non-resident will be ultimately
responsible.
2) The non-resident has a second option after the end of the taxation year. They may calculate taxable income
based on net rental income (after deducting related expenses such as interest, property taxes, management
fees, maintenance, repairs, strata fees, insurance, accounting fees, etc.) and elect to file a T1 personal tax
return. The taxable income will be subject to progressive tax rates ranging from approximately 22% to
43% for 2010. If the income tax calculated in this manner is less than the tax originally withheld, the non-
resident will receive a refund for the difference. This tax return may be filed any time up to two years after
the end of the applicable taxation year (e.g. for the 2010 taxation year, it may be filed up to December 31,
2012). This option is normally beneficial and will result in a refund as rental expenses will usually cause
income taxes to be less than the taxes withheld (25% of gross revenue).
3) In the calculation of taxable income, depreciation (referred to as “Capital Cost Allowance” or “CCA”) may also
be taken to reduce taxable income. The CCA rate on buildings is 4%. However, an individual who is
contemplating moving into the property in the future (e.g. retire to Canada) should normally not take any CCA
during the period that he is renting it. This is to avoid deemed disposition rules which result from a change of
use. If the property is sold for a gain, previously deducted CCA will be brought back into income at the time of
sale.
4) A third option is available before the commencement of a taxation year. If the non-resident has a Canadian
"agent" for income tax purposes (the tenant or management company may become the agent), the non-resident
and the agent may elect to file a T1 tax return by filing form NR6 before the beginning of the taxation year.
5) In this form, the non-resident and property manager will estimate net income for the year and are only required
to withhold 25% of estimated net income. The non-resident must then file a T1 by June 30 of the year
following the taxation year. If the T1 is not filed by June 30, a penalty of 25% of gross rental revenue will
be assessed against the agent. This third option is usually beneficial from a cash flow point of view if there are
any rental expenses. The total taxes will be the same as those in the second option mentioned above, but the
non-resident does not have to wait for a refund. Again, any difference between actual taxes calculated on the
T1 and taxes withheld during the year will be payable or refundable.
6) For non-residents, rental losses cannot be carried back or forward to other taxation years.
7) A form NR4 must be filed by the Canadian agent (or tenant) for each taxation year by March 31 of the
following year to report total rental revenue and the amount of taxes withheld. In order for the agent to remit
taxes and prepare this form, they must apply to CRA for a “non-resident remittance number”.
9) Some rental properties, which are operated as a hotel, may qualify for treatment as “business income” as
opposed to “rental income”. This will be determined by the management company as they must apply to CRA
for authorization for income to be treated as business income. The tax treatment of business income is different
than rental income and there are several advantages for non-residents to have the income treated as business
income. Please contact us if you feel this may be of relevance to you.
1) Any gain on the disposition of rental property in Canada will be subject to tax in Canada. This tax is levied in
two stages. First, there is a withholding tax at the time of disposition and then a final calculation of tax as
“Certificate of Compliance” (see attached “Example of Canadian Taxation upon Disposition of Canadian
Real Estate by Non-resident Individual”).
gain relating to the building may be increased to 50%. However, the purchaser’s lawyer may demand 50%
withholding tax on the entire proceeds.) Therefore all knowledgeable purchasers will request a Certificate of
T2062 may be filed before, and must be filed within 10 days of closing and we suggest that it be filed as early
In the Certificate application form T2062, CRA requests information regarding the rental of the property during
the period of ownership. If the property has been rented but withholding taxes have not been paid, CRA will
require that all the previous tax returns be filed and all outstanding taxes, interest and penalties also be paid
before they will issue the Certificate of Compliance.
of the actual gain, he can deduct all related selling expenses such as commissions, legal fees and accounting
fees. In addition, depending on the circumstances, he may be allowed “capital gains treatment” which means
that only 1/2 of the gain will be taxable. The taxable income will be subject to progressive rates from 22% to
43% (for 2010) and if the total tax is less that the withholding tax paid at the time of obtaining the Certificate
of Compliance, the non-resident will be entitled to a refund of the difference. Please refer to the attached
“Example of Canadian Taxation upon Disposition of Canadian Real Estate by Non-resident Individual”.
4) There is no tax deferral available if a replacement property is purchased (e.g. similar to a US tax “Section 1031
tax deferred exchange”). Such deferral is only available for a “business” property, under certain conditions.
HARMONIZED SALES TAX (“HST”) [replaced GST (“Goods and Services Tax”) in B.C.]
Generally, the HST rules are similar to the old GST rules. HST has replaced GST in B.C., but GST still exists in
some other provinces.
HST on real property is very complex and depends on the situation of the vendor, the situation of the purchaser, the
current and intended use of the unit (i.e. residential, personal or commercial), the current and intended use of the
entire building, the type of property (e.g. new residential complex, used residential complex, hotel or similar
property etc.), the property manager and the management contract. The following are some general guidelines but
you must obtain professional advice before making any decisions regarding HST. These comments are written from
a non-resident purchaser’s point of view.
HST of 12% is charged on the sale of taxable supplies which are used in Canada. Taxable supplies will generally
include commercial property (i.e. property rented on a nightly basis) and the rental of rooms on a nightly basis.
Acquisition of property:
A purchaser who is registered for HST can claim a refund (Input Tax Credit – “ITC”) of the HST paid on the
purchase of a commercial property. Therefore, most purchasers will register for HST. A property will be
considered a commercial property if it is used all or substantially all (generally considered to be more than 90%) for
short-term (e.g. nightly) rentals. In the most common scenario, a registered vendor sells a commercial property to a
registered purchaser. If the purchaser registers for HST before the “closing” (possession) date, the HST will usually
be waived on the purchase. If the purchaser is not registered by the closing date, the HST cannot be waived (i.e.
will have to be paid). However, the purchaser can register at a later date and claim the ITC on their first HST
return.
In order to claim the full ITC, the property must be used at least 90% of the time for nightly rentals. If the property
is used between 50 and 90% for rental purposes, the ITC must be prorated for the amount of personal use. If the
property is used more than 50% for personal use, neither the waiver of HST nor an ITC can be claimed. This also
applies to HST that was waived on the purchase of property. The HST may be required to be fully or partially
repaid depending on the personal use percentage.
The calculation of the personal use percentage is very complex and depends on many factors, including personal use
days, days rented, vacancy, occupancy, seasonal use, availability, intention, ease of access and other similar factors.
A registered purchaser can also claim ITCs for the HST paid on acquisition fees (e.g. inspection, appraisal and
legal) and the purchase of furniture, fixtures and improvements.
The HST will increase the transaction costs associated with the buying and selling of property as all services,
professional fees and new homes will be subject to the 12% HST.
For new homes, where a Purchase and Sale Agreement was signed on or after July 23, 2009, and ownership and
possession take place after June 30, 2010, then the 12% HST will apply.
There is a ”New Housing Rebate” for the purchase of new houses to ensure that, on average, purchasers of new
homes, up to $525,000, will receive a refund of most of the additional tax paid under harmonization.
Purchasers of new homes costing more than $525,000 will be eligible for a maximum rebate of $26,250 and the
rebate will be available whether the new housing is to be owner occupied or rented.
The HST will not be applicable to the purchase of a “used residential” home no matter how it will be used. This is
Change of use:
There are special very complex rules for the full or partial change of use of the property.
For income tax purposes, there will be a deemed disposition, and re-acquisition, at the fair market value if the
producing revenue to revenue producing. It may be possible to avoid the deemed disposition by doing a special
election.
For HST purposes, for example, regarding a change from residential to commercial, there will be a deemed
disposition and re-acquisition and an ITC may be able to be claimed in certain circumstances (e.g. if a new
residential complex is purchased and then changed to commercial use).
For a change from commercial to residential, there may be a deemed sale and re-purchase at the current fair market
value of the property for income tax purposes. For HST purposes, HST may have to be paid or repaid to CRA.
There will be penalties and interest if a purchaser registers for HST and claims the waiver of HST or ITC but only
uses the property only or principally for personal purposes.
There may be additional complications for a mixed-use property (e.g. part year nightly rentals, part year monthly
rentals and personal use).
Nightly rentals
HST must be charged on nightly rentals. Generally speaking, HST charged and collected must be remitted to CRA
and HST paid on purchases and expenses can be claimed as a refund by HST registrants.
If there is a property manager, they will generally charge and collect the HST on the nightly rentals. The property
manager will either remit the HST collected directly to CRA monthly, or forward the HST to the owner. The
property manager may require the owner to sign a special election in order to remit the HST directly to CRA.
If the owner receives the HST from the property manager, they must pay it to CRA when the annual HST return is
filed. This is called HST payable.
HST return
Generally, the HST return is prepared and filed annually on a calendar basis. The deadline for filing is March 31 of
the following year.
If the HST collected by the property manager is sent to the owner, this “HST payable” must be reported and paid by
the owner. If the property manager remits the HST collected directly to CRA, there is no HST payable to report on
the HST return.
The registered owner may also claim ITCs for the HST included in expenses paid (e.g. repairs, maintenance,
management fees, strata fees, utilities etc.). Any ITC must be prorated for personal use.
Sale
HST must be charged on the sale of a commercial property. However, if the purchaser is also registered and will
use the property for commercial purposes (e.g. nightly rental), the vendor may agree to waive the HST.
If the property is used residential property, there is no HST on the sale.
We can help you
We can assist the non-resident and the Canadian property manager as noted in our pamphlet entitled “Services for
we will ask that you complete our Questionnaire.
Please note that we have additional pamphlets regarding nightly rental producing business income, monthly rental
and ownership without rent.
Contact

2f \ a0-\ a- \ RETaxwithExampleNightly
in Canadian Rental Real Estate
Example Calculations of the Three Options
Jan. 9, 2008
Examples: OPTIONS
1 2 3
File NR6 &
File T1 T1
Rental Revenue $ 40,000 $ 40,000 $ 40,000
Expenses
Advertising (e.g. TW) 1,000 1,000 1,000
Insurance 500 500 500
Interest 8,000 8,000 8,000
Management Fee 14,000 14,000 14,000
Property Tax 3,500 3,500 3,500
Repairs and Maintenance 4,000 4,000 4,000
Professional Fees 200 700 1,100
Utilities 1,000 1,000 1,000
32,200 32,700 33,100
Net Income before Capital 7,800 7,300 6,900 *

Capital Cost Allowance (optional) 0 (4,000) (4,000)
Net Income 7,800 3,300 2,900
Income Tax (e.g. Net Income x 25%) 0 825 725
Tax withheld ($40,000 x 25%) $ 10,000 $ 10,000 $ 1,725 *Note 2
Final Income Tax $ 10,000 $ 825 $ 725

Income Tax (Refund) 0 (9,175) (1,000)
Net cash inflow after tax (refund) $ (2,200) $ 6,475 $ 6,175
Notes:
1) Please refer to our pamphlet "Tax Considerations for Non-Resident Individuals Investing in Canadian Rental
Real Estate" for an explanation of the above example calculations
2) Withholding tax per NR6 equals Net Income before CCA times 25%.
1operman/2f-/a-/NRInvestEgNightly
June 10, 2010
Assumptions:
Purchase (Note 1)
Sale (Note 1)

less: ACB (400,000)
Cash flow on sale

(376,000)


less: ACB 400,000
Commission 22,000
(426,000)
Notes:
Our Services
Income Tax
Acquisition
Advising with respect to appropriate ownership
structure
Calculating the Adjusted Cost Base of land, building
and furniture
Advising regarding the implications of a change in use
Annual
Keeping track of and calculating the ACB during the
period of ownership
Disposition
Estimating and explaining income tax on capital gain Canadian
Preparing of the request for Certificates of Compliance
and Comfort Letter, arranging payment of estimated
Tax for Non-residents
taxes to CRA and delivery of Certificates to lawyer
Preparing and filing of T1 personal tax return to report
Investing in
gain on sale and applying for income tax refund, if Canadian Real Estate
applicable
(No Rental)
Tax planning issues which should be discussed include
ownership structure, capitalization of expenditures to
reduce tax on future gains, risks of borrowing outside
Canada and other issues.
November 1. 2010 Providing You

2f/a2/NRBrochureNoRental
with Peace of Mind
on business income, nightly rentals or monthly rentals,
please see our web site and please contact us.
Don Nishio CA
Tel: 604-872-8883 Fax: 604-872-8889
don@lamlonishio.ca
www. lamlonishio.ca
!"#$%&'(")'*+(",-&+'*(.! Change of Use
Purchase
This brochure assumes that the property is being used CRA is concerned that the non-resident may sell the
Property Transfer Tax is payable at the time of purchase. 100% for personal use and is not rented at any time, property, take the proceeds out of Canada and never
This tax is calculated as 1% on the first $200,000 and 2% either for nightly rental or monthly rental. pay any tax. It would be very difficult for CRA to
on the excess over $200,000. Other acquisition costs may collect tax from a non-resident who no longer has any
include inspection fees, appraisals and legal fees. There are special very complex rules for the full or par- assets in Canada. Therefore, the way that CRA en-
tial change of use of the property. For example, for in- forces the collection of this tax is to transfer the obli-
Harmonized Sales Tax (“HST”) of 12% will generally be come tax purposes, there will be a deemed disposition gation to pay tax from the non-resident vendor to the
charged on the purchase of a newly built property or on and re-acquisition at the fair market value if the property purchaser of the property. Unless the purchaser re-
the purchase of a commercial property that had been is changed from revenue producing (nightly or monthly ceives a signed declaration that the vendor is a resi-
rented by the previous owner. British Columbia Social rentals) to not producing revenue, or from not producing dent of Canada or receives the above-mentioned Cer-
Service Tax (commonly called Provincial Sales Tax or tificate of Compliance, the purchaser will be liable for
revenue to revenue producing. This could result in in-
“PST”) was replaced by HST as of July 1, 2010. A pur- withholding tax of 25% (or in some cases, 50%) of
come taxes being payable on any increase in value, even
chaser of property, used for personal purposes, cannot and the selling price.
should not register for HST. HST will not be charged on
though the property has not been sold. It may be possi-
the purchase of a used residential property (personally ble to avoid the deemed disposition by doing a special
election. Therefore all knowledgeable purchasers will request a
used property), which includes most homes, townhouses
Certificate of Compliance when purchasing property
or condos.
There may be additional complications for a change to a from a non-resident. This procedure applies whether
mixed use property (e.g. part-year nightly rental or part- the purchaser is a Canadian resident or not. In prac-
Adjusted Cost Base year monthly rental and personal use). tice, the purchaser's lawyer will generally hold back
For Canadian tax purposes, the tax cost of the prop- 25% (or in some cases, up to 50%) of the entire pur-
erty is referred to as the Adjusted Cost Base or In addition, there will be HST complications if the chase price until he receives the Certificate.
“ACB”. The ACB of a property is important when owner commences to rent the property on a nightly ba-
determining the amount of any gain upon the sale of sis. If the owner is considering renting the property on It currently takes about 12 to 16 weeks for CRA to
the property. either a monthly or a nightly basis, there will be implica- process a Certificate of Compliance. The application
tions for both Canadian income tax and HST, on the form T2062 may be filed prior to sale but must be
Items which may be added to the ACB include the rental and on the eventual sale. filed within 10 days of closing. We suggest that it be
purchase price, Property Transfer Tax, HST (for new filed as early as possible. Penalties will be assessed if
properties), legal fees relating to the purchase, the Sale it is filed later than 10 days after closing.
cost of furniture and fixtures (including taxes) which Any gain on the disposition of rental property in Canada
are sold with the property and the cost of major addi- After the end of the taxation year in which the prop-
will be subject to tax in Canada. This tax is levied in erty is sold, the non-resident may file a T1 personal
tions or renovations. two stages. First, there is a withholding tax at the time tax return to report the disposition of the property and
of disposition and then a final calculation of tax as re- calculate the actual gain and the final tax. In this cal-
Canadian Tax Return ported in the T1 personal tax return which is due after culation of the actual gain, the non-resident can de-
year end. duct all related selling expenses such as commissions,
A non-resident owner of a property, which is not
rented, is not required to file an annual income tax legal and accounting fees.
The withholding tax is paid by filing a form T2062 and
return as there is no income to report. paying a withholding tax of 25% (on the land portion) In addition, depending on the circumstances, the non-
and up to 50% (on the building portion) of the in- resident may be allowed “capital gains treatment”
The non-resident owner will not be required to file an terim gain on sale. The interim gain is calculated as the
income tax return until the property is sold. If the which means that only 1/2 of the gain will be taxable.
selling price less the ACB. At this stage, commissions, The taxable income will be subject to progressive
property is sold for a gain, the non-resident must file legal and accounting expenses are not deductible in the
an income tax return to claim a refund of taxes with- rates from 22% to 43% (for 2010) and since the total
calculation of the interim gain. Once this form is ac- tax will be less that the withholding tax paid at the
held (see Sale). If the property is sold for a loss, the cepted by CRA and the tax has been paid, CRA will
non-resident cannot claim the loss as CRA considers time of obtaining the Certificate, the non-resident will
issue a “Certificate of Compliance”. be entitled to a refund of the difference.
this to be a personal expense.
Don T. Nishio, Ltd.

in Canadian Real Estate (Never Rented)
August 25, 2010
1) Property Transfer Tax is payable at the time of purchase of real property. This tax is calculated as 1% on the
(e.g. July 1 for Whistler) and arrangements should be made with the municipality to ensure they are paid on a
timely bases. The amount is based upon the assessed value and the “mill rate” set by the municipality. As a
general “rule of thumb”, annual property taxes are approximately 0.5 to 1% of the value of the property,
assuming that the property is classified as residential.
3) Harmonized Sales Tax (“HST “) of 12% will generally be charged on the purchase of a newly built property or
on the purchase of a commercial property that had been rented by the previous owner. British Columbia Social
Service Tax (commonly called Provincial Sales Tax or “PST”) was replaced by HST as of July 1, 2010. This
HST will become part of the cost. If your intention is to use the property personally, HST must be paid upon
purchase. A purchaser of property used for personal purposes cannot and should not register for HST. HST
will not be charged on the purchase of a used residential property (personally used property), which includes
most homes, townhouses or condos.
4) The HST will not be applicable to the purchase of used residential homes no matter how it will be used. This is
reduce tax or future gains, risks of borrowing outside Canada, and other similar issues.
Adjusted Cost Base
1) For Canadian tax purposes, the tax cost of the property is referred to as the Adjusted Cost Base (“ACB”). The
ACB of a property is important when determining the amount of any gain upon the sale of the property. Items
which may be added to the ACB include the purchase price, Property Transfer Tax, HST (for new properties),
legal fees relating to the purchase, the cost of furniture and fixtures (including taxes) which are sold with the
property and the cost of major improvements or renovations. It is important to keep copies of invoices or
receipts for all the above costs as they must be provided to CRA when requesting a Certificate of Compliance
(see below).
Canadian Tax Return
1) A non-resident owner of a property, which is not rented, is not required to file an annual income tax return as
there is no income to report.
2) The non-resident owner will not be required to file an income tax return until the property is sold. If the
property is sold for a gain, the non-resident must file an income tax return to claim a refund of taxes withheld
for the purpose of obtaining the Certificate of Compliance (see below). If the property is sold for a loss, the
non-resident cannot claim the loss as CRA considers this to be a personal expense.
Change of Use
1) This pamphlet assumes that the property is being used 100% for personal use and is not rented at any time,
either for nightly rental or monthly rental.
2) There are special very complex rules for the full or partial change of use of the property.
3) For income tax purposes, there will be a deemed disposition, and re-acquisition, at the fair market value if the
producing revenue to revenue producing. This could result in income taxes being payable on any increase in
value, even though the property has not been sold. It may be possible to avoid the deemed disposition by doing
a special election.
4) There may be additional complications for a change to a mixed-use property (e.g. part-year nightly rental, part-
year monthly rental and personal use). Complications could also result, for example, from renting a suite in the
home.
5) In addition, there will be HST complications if the owner commences to rent the property on a nightly basis.
6) If the owner is considering renting the property on either a monthly or a nightly basis, there will be implications
for both Canadian income tax and HST, on the rental and on the eventual sale. Please contact us if you feel this
may be of relevance to you.
1) Any gain on the disposition of personal property in Canada will be subject to tax in Canada. This tax is levied
in two stages. First, there is a withholding tax at the time of disposition and then a final calculation of tax as
on sale. The interim gain is calculated as the selling price less the ACB. At this stage, commissions, legal and
accounting expenses are not deductible in the calculation of the interim gain. Once this form is accepted by
CRA and the tax has been paid, CRA will issue a “Certificate of Compliance” (see attached “Example of
Canadian Taxation upon Disposition of Canadian Real Estate by Non-resident Individual”).
the purchaser will be liable for withholding tax of 25% of the selling price and the purchaser’s lawyer must
remit this withholding tax to CRA. Some purchaser’s lawyers may demand 50% withholding tax on the entire
proceeds. Therefore all knowledgeable purchasers will request a Certificate of Compliance when purchasing
property from a non-resident. This procedure applies whether the purchaser is a Canadian resident or not.
T2062 may be filed before, and must be filed within 10 days of, closing and we suggest that it be filed as early
of the actual gain, he can deduct all related selling expenses such as commissions and legal and accounting
fees. In addition, depending on the circumstances, he may be allowed “capital gains treatment” which means
that only 1/2 of the gain will be taxable. The taxable income will be subject to progressive rates from 22% to
43% (for 2010) and if the total tax is less that the withholding tax paid at the time of obtaining the Certificate
of Compliance, the non-resident will be entitled to a refund of the difference.
4) HST should not be charged on the sale of a used residential property which was used for personal purposes
only.
Please refer to the attached “Example of Canadian Taxation upon Disposition of Canadian Real Estate by Non-
resident Individual”.
We can help you
We can assist a non-resident as noted in our pamphlet entitled “Services for Non-resident Individuals Investing in
Canadian Real Estate”.
In particular, we can assist a non-resident with the following:

! Keeping track and calculating the ACB during the period of ownership,
! Advising on the tax implications of a change in use,
! Applying for a Certificate of Compliance upon sale, and
! Preparing and filing the T1 personal tax return to report the gain on sale, and apply for a refund.
In order to provide you with the services noted above, we ask that you complete our Questionnaire.
Please contact us if you would like either of the above. Please note that we also have additional pamphlets
regarding nightly rental producing rental income, nightly rental producing business income and monthly rental.
Contact
659-G Moberly Road, Vancouver, B.C., Canada, V5Z 4B2.

2f \ a0 \ a\ RETaxwithExampleNoRental
June 10, 2010
Assumptions:
Purchase (Note 1)
Sale (Note 1)

less: ACB (400,000)
Cash flow on sale

(376,000)


less: ACB 400,000
Commission 22,000
(426,000)
Notes:

Non-Residents Investing in Canadian Real Estate Update

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!"#$%&#'()&*!

For more detailed pamphlets, questions, or information

Tax Considerations for Non-Resident Individuals Investing

Taxation of Business Income

We can help you

Please contact us if you would like either of the above.

659-G Moberly Road, Vancouver, B.C., Canada, V5Z 4B2

Sept. 14, 2010

Business Revenue $ 40,000

Net Income before Capital 7,300

Withholding tax at time of disposition to obtain Certificate of Compliance ("CC")

Selling price $ 600,000

Cash flow on sale

Selling price 600,000

Holdback by lawyer 150,000

Selling price 600,000

Tax refund to NR owner - summer of the following

Tax planning issues which should be discussed include

Tax Considerations for Non-Resident Individuals Investing

Taxation of Rental Income

11) HST should not be charged on monthly rentals.

Professional advice should be obtained for any proposed change of use.

We can help you

Please contact us if you would like either of the above.

659-G Moberly Road, Vancouver, B.C., Canada, V5Z 4B2

Sept 20, 2010

Rental Revenue $ 15,000 $ 15,000 $ 15,000

Net Income before Capital 1,000 700 400 *Note 1

Tax withheld ($15,000 x 25%) $ 3,750 $ 3,750 $ 100 *Note 2

Final Income Tax $ 3,750 $ - $ -

Net cash inflow after tax (refund) $ (2,750) $ 700 $ 400

Withholding tax at time of disposition to obtain Certificate of Compliance ("CC")

Selling price $ 600,000

Cash flow on sale

Selling price 600,000

Holdback by lawyer 150,000

Selling price 600,000

Tax refund to NR owner - summer of the following year $ 22,000

Tax Considerations for Non-Resident Individuals Investing

Taxation of Rental Property Income

If the property is used residential property, there is no HST on the sale.

We can help you

Please contact us if you would like either of the above.

659-G Moberly Road, Vancouver, B.C., Canada, V5Z 4B2

Rental Revenue $ 40,000 $ 40,000 $ 40,000

Net Income before Capital 7,800 7,300 6,900 *

Tax withheld ($40,000 x 25%) $ 10,000 $ 10,000 $ 1,725 *Note 2

Final Income Tax $ 10,000 $ 825 $ 725

Net cash inflow after tax (refund) $ (2,200) $ 6,475 $ 6,175

Withholding tax at time of disposition to obtain Certificate of Compliance ("CC")

Selling price $ 600,000

Cash flow on sale

Selling price 600,000

Holdback by lawyer 150,000

Selling price 600,000

Tax refund to NR owner - summer of the following year $ 22,000

November 1. 2010 Providing You

Tax Considerations for Non-Resident Individuals Investing

Adjusted Cost Base

Canadian Tax Return

We can help you

In particular, we can assist a non-resident with the following:

659-G Moberly Road, Vancouver, B.C., Canada, V5Z 4B2.

Withholding tax at time of disposition to obtain Certificate of Compliance ("CC")