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Non Resident Canadian Living in the Cayman Islands- Sale & Purchase of PropertyDear Mr. Ingram,
I currently own a property in Vancouver which I am planning to sell. The property is currently rented to XXXXXXX Corporate Rentals who in tern rent it out to clients. I have purchased a new apartment to replace the existing one and it will also be rented out in the same manner.
My question is will I have to pay Capital Gains Tax particularly as the full amount I get from the existing property will be reinvested into the new one.
Thank you very much.
Regards
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david ingram replies:
You are taxable on any rental profits on an annual basis and I am sure that you are filing your Section 216(4) tax return to report those profits and pay Canadian Income tax by June 30th of the year following the rental.
There is NO rollover for rental properties in Canada as there is in the United States.
The purchaser of the unit you are selling is required to deduct 25% of the gross sale price as a payment against possible capital gains tax unless you calculate the actual profit by filing forms T2062 (for any property) and T2062A (when it is a rental property).
http://www.ccra-adrc.gc.ca/E/pbg/tf/t2062/t2062-01e.pdf
If the property was a rented property, you also need to file a T2062A with the T2062.
http://www.ccra-adrc.gc.ca/E/pbg/tf/t2062a/t2062a-01e.pdf
If the property was rented, you should have been filing Canadian returns under Section 216(4) (Form T1 plus 776) to report the rental income to Canada.
You will also have to repay the tax on any CCA (Capital Cost Allowance or depreciation) you have claimed against the rental income.
I am assuming that the unit was heavily mortgaged to reduce rental profits. Nothing else would make sense for a resident of a tax shelter country.
As you know, this is how we make our living. We would be glad to help you with the tax returns and the filing of forms T2062 and T2062A if necessary.
We now have twelve people dedicated to the filing of international tax returns
In alphabetical order:
George Arora, CPA
Sonja Clark, CA, CPA, LLB, BSc (11 years)
Corby Coffin (2 years)
Wendy Cook (7 years)
Katy Forward (2 years)
George Hatton CA (15 years)
David Ingram (39 years now - ouch!)
Peter Ingram (3 years )
Jas Mahal (ex CRA) (five years)
Gail Ritter (6 years)
Kate Reid (19 years with the CRA)
D'Arcy Von Schleinitz (just about a CGA) (15 years)
The bracketed figure is the number of years they have been with us.
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