Real Estate Question - What country, Mexico, Morocco, Dubai, Ecuador - Gary Scott

 If I were to sell my principal residence in Canada....can I take the funds and buy property in somewhere like Morocco, Bahamas or Mexico without their being any big tax implications.  My plan would be to make that my principal residence for a couple of years and then sell it so I would like to find a country that didn't have capital gains for that type of sale.  Can you give me any guidance? 

 
Thanks

david ingram replies:

There are lots of places you can buy without a capital gains tax and some that have a capital gains tax but it does not apply to your principal residence.

For instance, until 2002, your house was tax free in Mexico if you had lived in it for the two years before sale.  Now you have to  get the Notario handling the transaction to agree that it was your residence or he or she will tax it because they are responsible for the tax if you do not pay it so they want to collect first. You will have to possess an FM-2 or FM-3 visa as well.

In the US, you have to have lived in the house for 24 months out of the last 60 for it to be tax free up to $250,000 profit each and you have to be a legitimate resident of the US.  That implies that you have an L1, H1, TN, O1, P1 visa or a green (resident alien) card.

In Canada, it is tax free if it is your principal residence.  You can have a summer cabin or winter ski chalet and a house in town and decide whioch one will be taxable and which one is tax free. Of course, you have to be legitimate resident as well.

There is no capital gains tax in the Bahamas, Costa Rica, Grand Caymans, Turcs and Caicos, Dubai, and another 100 countries, etc., etc.

I do not know about Morocco.  However two of my clients who are Algerian citizens are very happy to be in Canada and this article (at http://www.commondreams.org/news2005/0930-04.htm)
would want me to avoid the place if it came to buying a home there. Both of these clients had come to Canada years ago and went back to Algeria to make money and left super high paying jobs because they were literally afraid for their lives. 

And remember that going somewhere and buying a property for two years is not going to make you any money unless you just happen to pick 'the' next hot real estate market.  You are staitstically more likely to lose money in two years than make money in my opinion.

By the way, one of the best places to buy is likely Ecuador.  You could  look up Gary Scott;'s Site at www.garyscott.com or read his specific article at http://www.garyascott.com/2007/01/08/1460.html.

Gary was in my office in the summer of 2000 and was pushing Ecuador then.  It has done well since and International Living published another article praising Ecuador in the last couple  of weeks.

However, I would not advise you to buy in Ecuador, Mexico, or any other place for a planned two year period.

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