Guide to Property Taxes in Canada

Nonresidents are generally subject to Canadian tax on specified Canadian-source income, including income and gains derived from Canadian real estate. Married individuals are generally taxed separately.

Income Tax

Canada imposes income tax at both the federal and provincial or territorial levels. Federal tax brackets are adjusted annually, and provincial or territorial tax rates generally apply in addition to federal income tax.

Federal Income Tax Rates for 2026:

Rental Income Tax

Rental income earned by a nonresident from Canadian real estate is generally subject to 25% nonresident withholding tax on gross rental income. The tenant, Canadian agent or property manager is generally responsible for withholding and remitting the tax. In the absence of an election under Section 216, the tax withheld is generally the nonresident's final Canadian tax liability on the rental income.

A nonresident may elect under Section 216 of the Income Tax Act to file a Canadian tax return and pay tax on net Canadian rental income rather than gross rental income. This allows qualifying rental expenses to be deducted and can result in a refund of some or all of the 25% tax previously withheld.

A nonresident and their Canadian agent may also file Form NR6. Once approved by the Canada Revenue Agency, the agent may generally withhold 25% on estimated net rental income rather than gross rent during the year. The nonresident must subsequently file the required Section 216 return.

Qualifying rental expenses can generally include advertising, insurance, eligible mortgage interest, property management fees, professional fees, property taxes, utilities, eligible repairs and maintenance and certain other expenses. Capital Cost Allowance (CCA) may also be available, subject to specific rules and potential recapture when the property is sold.

Capital Gains Tax

Nonresidents are generally subject to Canadian tax on gains from the disposal of taxable Canadian property, which includes Canadian real estate.

A capital gain is generally calculated as the proceeds of disposition less the property's adjusted cost base and qualifying selling expenses.

The taxable portion of the capital gain is included in the nonresident's Canadian taxable income and is subject to the applicable federal and provincial or territorial income tax rules.

The treatment of capital gains should be determined using the inclusion rate legally applicable for the year of disposal, as Canada's capital-gains inclusion-rate rules have been subject to recent legislative changes and proposals.

Sale of Canadian Property by a Nonresident

Special compliance rules apply when a nonresident disposes of taxable Canadian property.

The nonresident seller generally must notify the Canada Revenue Agency of the disposition or proposed disposition and may obtain a Certificate of Compliance under Section 116.

The certificate procedure may require the seller to make a payment on account of Canadian tax or provide acceptable security based on the gain arising from the property.

If the appropriate certificate is not obtained, the purchaser can become liable for withholding and remitting a specified portion of the purchase price to the Canada Revenue Agency.

This withholding is not necessarily the seller's final capital gains tax liability. The nonresident generally reports the disposition on a Canadian income tax return, where the final tax liability is calculated and any excess amount previously remitted may be refunded.

Buying and Selling Costs and Taxes

Additional Property Transfer Taxes

Foreign buyers of Canadian residential property may face additional provincial taxes on top of the ordinary land transfer or property transfer taxes.

In British Columbia, foreign nationals, foreign corporations and certain taxable trustees acquiring residential property in designated areas are generally subject to an Additional Property Transfer Tax of 20% of the property's fair market value. The designated areas include Metro Vancouver and certain other specified regional districts.

In Ontario, foreign nationals, foreign corporations and certain taxable trustees acquiring residential property are generally subject to the Non-Resident Speculation Tax (NRST) at 25% of the value of the consideration. The NRST applies throughout Ontario and is payable in addition to the ordinary Ontario Land Transfer Tax.

Foreign purchasers should also consider Canada's federal restrictions on residential property purchases by non-Canadians. The federal prohibition on purchases of certain residential property by non-Canadians currently applies through 1 January 2027, although a number of statutory exemptions apply.

Property Holding Tax

Canadian real estate is generally subject to annual property tax imposed by the relevant municipality. Property taxes are usually calculated by applying the applicable municipal and other property-tax rates to the property's assessed value.

Rates vary considerably between municipalities and can change annually. The assessed value used for tax purposes may also differ from the property's current market value.

Where a property is held to produce rental income, property taxes incurred for the period during which the property is available for rent are generally deductible in calculating taxable rental income, subject to the applicable Canadian tax rules.

For example, the 2026 residential property tax rate in Toronto is approximately 0.7673% of assessed value, including the city, education and City Building Fund components. In Vancouver, the 2026 total residential property tax levy is approximately CAD 3.36394 per CAD 1,000 of taxable value, equivalent to approximately 0.3364%.

Actual rates should be checked with the relevant municipality for the applicable tax year.