Tax Advisory Services for Canadian Returnee

Returning to settle in Canada triggers tax obligations on worldwide income. Canada Estates’ tax advisory services can help you clarify your tax status, understand CRA filing requirements, legally and properly handle your assets, and avoid double taxation.

Definition of Canadian Tax Residents and Non-Residents

Understanding your tax status is the first step in planning your return, as it directly determines the scope of income you need to declare in Canada. This is also the core issue that must be determined first before any Canada return tax advisory planning.

Key Differences in Tax Status

Tax Resident:** Must declare all worldwide income to the Canada Revenue Agency (CRA).
Non-Tax Resident:** Only needs to declare income from Canadian sources (such as rent, Canadian employment salary, etc.).

Criteria for Determining Tax Resident Status

The CRA primarily determines your status based on whether you have significant residential ties to Canada. During Canadian tax consultations, professional Canadian tax advisors will assess these ties to accurately clarify your tax status.

Factual Resident

This is the most common type, with criteria based on your “Residential Ties,” including:

Days of Residence: Residing in Canada for more than 183 days in a year.
Family Ties: Whether your spouse, common-law partner, or dependent children reside in Canada.
Dwelling Ties:** Owning or leasing a permanent residence in Canada.
Economic and Social Ties: Having Canadian bank accounts, driver’s licenses, health cards, credit cards, or social connections.

Deemed Resident

You may be considered a deemed resident of Canada if you have not established significant residential ties with Canada to be considered a factual resident, but you stayed in Canada for 183 or more days in the year.

Part-Year Resident

An individual may be resident in Canada for only part of a year, in which case the individual will only be subject to Canadian tax on his or her worldwide income during the part of the year in which he or she is resident; during the other part of the year, the individual will be taxed as a non-resident.

Criteria for Determining Non-Resident Status

Non-residents are those without significant residential ties, living overseas, and not staying in Canada for more than 183 days in a year. They only need to declare income generated in Canada. The determination of non-resident status is based on actual living arrangements and habits; details can be consulted with a Canadian tax advisor.

Key Points of Canadian Property Taxation

A complete property purchase process inevitably involves taxation. Clients often have questions about all tax matters from purchasing a pre-construction unit to taking possession. We will explain them in details.

Vancouver Property Taxation

1. Taxes upon Taking Possession

Assuming a client purchased a pre-construction unit four years ago and us preparing to take possession this year. Upon taking possession, the client needs to prepare additional funds for the following taxes:

1.Goods and Serices Tax (GST)： 5% GST is payable (currently not required for properties under $1 million).

2.**Property Transfer Tax (PTT):** The tax rate is approximately 2% of the property price (actual rate is calculated progressively).

2. Taxes for Owner-Occupied Properties after Possession

Property Tax:** Approximately 0.59% to 0.71% of the property value, depending on the property type.

3. Taxes upon Selling the Property

Capital Gain Tax：

- Local Resident：If the sold property is the principal residence, no tax on the capital gain.
- Non-Resident：If the non-resident holds the property for investment, a 25% capital gains tax is payable on the net profit. For example, if the gross profit is CAD $130,000, with $30,000 in necessary selling expenses (e.g., legal fees, accountant fees, real estate agent commission), the net capital gain is $100,000. 50% of this gain ($50,000) is taxable. The 25% non-resident withholding tax on the taxable portion would be approximately $12,500.

The calculation for the above example is explained below:

Item Description	Amount (CAD)
Gross Profit from Sale	$130,000.00
Less: Necessary Selling Expenses	$30,000.00
Net Capital Gain Amount	$100,000.00
50% Taxable Capital Gain (Base for Tax Calc.)	$50,000.00
25% Non-Resident Withholding Tax	$12,500.00

4. Tax on Rental Income for Non-Residents

If a non-resident rents out the property:

1.Withholding Tax: The property management company will withhold 25% of the gross rental income as withholding tax and remit it to the CRA.

2.Filing and Tax Refund: Each year, the management company is also responsible for filing the NR4 form for the client. After filing with the CRA, the actual tax payable is typically around 5% of the rental income.

3.Refund of Overpaid Tax: Clients usually receive a tax refund (Tax Refund) around March each year for the overpaid withholding tax.

Toronto Property Taxation

1.Taxes upon Taking Possession

The possession process in Toronto is more complicated than that in Vancouver. Assuming a client’s pre-construction unit is scheduled for possession this year:

Harmonized Sales Tax (HST): The sale price from most developers already includes HST, usually no extra payment is needed.
Closing Cost: The client needs to prepare funds in total approximately 5% to 7% of the property price, including:
- Street Construction Fee: Approximately $15,000 – $20,000
- Provincial Land Transfer Tax (PLTT): ~1% of property price
- Municipal Land Transfer Tax (MLTT): ~1% of property price
- Legal Fees

2.Taxes for Owner-Occupied Properties after Possession

Property Tax:** Payable annually, approximately 0.7% of the property value.

3. Taxes upon Selling the Property

Local Resident Sale: If the sold property is the principal residence, no capital gains tax is payable even if the unit has appreciated.
Non-Resident Investment Sale:** The calculation method for capital gains tax is the same as in Vancouver; please refer to the capital gains tax calculation example above.

4.Tax on Rental Income for Non-Residents

If a non-resident uses the property for investment or rental:

1.Withholding Tax:The property management company will withhold 25% of the gross rental income as withholding tax and remit it to the CRA.

2.Filing and Tax Refund:Each year, the management company is also responsible for filing the NR4 form for the client. After filing with the CRA, the actual tax payable is typically around 5% of the rental income.

Refund of Overpaid Tax: Clients usually receive a tax refund (Tax Refund) around March each year for the overpaid withholding tax.

Vacancy Tax Notes for Vancouver and Toronto

Additionally, note that both Vancouver and Toronto have vacancy taxes.

Vancouver (Metro Vancouver): For non-resident, if the property is vacant for more than six months (183 days), a 2% Speculation and Vacancy Tax (Provincial) and a 3% Empty Home Tax (City of Vancouver only) are payable.
Toronto: If the unit is vacant for more than 6 months (183 days), no provincial empty home tax but there is a 3% Vacancy Home (VHT) Tax (City of Toronto) is payable.

Therefore, if clients rent out their property on a short-term lease, it is recommended that the lease term better exceeds 6 months to avoid the vacancy tax.

Budget 2025 proposes to eliminate the 1% Underused Housing Tax from 2025 onwards. All UHT requirements would still apply in respect of the 2022 to 2024 calendar years. Contact us for more information.

Professional Canadian Property Tax Advisory Services Help You Return Steadily

Canada Estates provides professional tax advisory services covering all necessary tax consultation and planning advice for returning to Canada and purchasing property. For example, the optimal timing for handling Hong Kong MPF before returning, tax considerations during the Soft Landing, are key areas we assist clients with. We first understand the client’s background and original plans, and through professional Canada return tax advisory services, help you establish the most optimized asset allocation structure.

Canada Estates does not charge any fees before fully understanding the client’s situation. When you decide you need a customized return and tax planning solution tailored to your circumstances, the tax advisory service will be then charged on hourly basis.

Contact us immediately to inquire about fee details, and let our professional team help you overcome tax obstacles and make your returning easy.

Frequently Asked Questions

1. How should I plan my tax status before preparing to return?

Before returning, assess your days of residence in Canada, family, and financial ties (e.g., dwelling, spouse/children, bank accounts) to help clarify your tax status. Before immigrating, conduct market value assessments for all overseas assets (e.g., Hong Kong properties, investments, pensions), prepare sufficient documentation for future capital gains calculations, and consult a Canadian tax advisor to develop legal tax reduction and filing strategies.

2. Do non-residents still need to file tax returns?

Yes. Although non-residents do not need to declare worldwide income, if they have income in Canada (e.g., rental property income, dividends), they must still file tax returns and pay relevant taxes according to local tax regulations.

3. How to choose a qualified and professional Canadian tax advisor?

When selecting a Canadian tax advisor, it is recommended to choose a consultant team familiar with the tax laws of both Hong Kong and Canada and immigration asset planning. The Canada Estates team provides professional tax advisory services specifically for returning residents and overseas property buyers, familiar with the latest Hong Kong-Canada tax systems and immigration planning. Contact us for the tax advisory service for your returning preparation.

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