Property Taxes in Canada

Nonresident foreigners are liable to tax on their Canadian-sourced income. Married couples are taxed separately.

Income Tax: Income is generally taxed at both the federal and provincial levels. In all provinces, except Quebec, the Canadian Government collects taxes on behalf of the provincial or territorial government. The provincial rules for computing income are generally consistent with the federal rules. Tax bands and rates are adjusted annually.

Rental Income:

  • 25% Withholding Tax: Nonresidents earning income from the rental of Canadian real estate are generally subject to a 25% tax on gross income, withheld by the tenant or property manager. This withholding tax is considered the nonresident´s final tax obligation to Canada.
  • Section 216 Election: Nonresidents earning rental income can elect under section 216 of the Income Tax Act (Canada) to file an income tax return, thereby being taxed on net rental income at federal tax rates.

Federal Income Tax Rates for 2024:

TAXABLE INCOME, CAD TAX RATE
Up to $55,867 15%
$55,867 - $111,733 20.50%
$111,733 - $173,205 26%
$173,205 - $246,752 29%
Over $246,752 33%

Deductions: Deductible expenses include Capital Cost Allowance, advertising, insurance, interest, maintenance and repair costs, management, administration and legal fees, office expenses, property taxes, travel, utilities, and others.

Capital Gains: Only 50% of the final capital gains are taxed as part of income. Capital gains are computed by deducting costs incurred in selling and purchasing the property, capital expenditures, and costs such as additions and improvements.

Federal Withholding Tax: A clearance certificate procedure requires a purchaser to withhold the proceeds paid to a nonresident seller on the sale of Canadian properties. The amount withheld is generally 25% (50% on certain properties) of the net gain on disposition if proper notice is given to the authorities and a clearance certificate is provided to the purchaser.

Buying and Selling Costs/Taxes in Canada (2024):

Cost Type Rate/Amount
Property Transfer Tax 0.50% - 2.00%
Agent Fee (Buyer) -
Agent Fee (Seller) 3.00% - 7.00%
Legal Fees 0.50% - 1.00%
Notary Fees 0.10% - 1.00%
Roundtrip Transaction Costs 4.10% - 11.00%
Source: Global Property Guide, PWC

Property Holding Tax

Property taxes are levied by local governments based on the assessed value of the property. Property taxes can be deducted from rental income when paying taxes.

Effective Property Tax Rates in Major Canadian Municipals (2024):

Municipality Residential Tax Rate
Calgary 0.66%
Edmonton 0.94%
Halifax 1.12%
Montreal 0.59%
Fredericton 1.33%
Kitchener 1.21%
Saskatoon 1.29%
Montreal 0.59%
St. John 0.91%
Toronto 0.72%
Vancouver 0.28%
Victoria 0.44%
Winnipeg 2.64%
Source: Global Property Guide, PWC

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