Expert: Cinzia Dalgarno - 8/19/2009

Question
QUESTION: Hi,

I'm interested in buying a condo/loft in Toronto,Ontario using my oversea company.  
What are the differences between buying under my name and my oversea company's name, such as regulation, tax, anything that is prohibited?    
From my brief understanding, it is almost same as Canadian buying in Ontario, only tax is a little different if buy using oversea company.
How about mortgage?  Is the requirement going to be the same as personally bought property?

Thanks.

ANSWER: Hi Jan. You will have a tough time finding a lender who will allow you to obtain a mortgage in the name of a company which is not registered in Canada. Typically, when a mortgage is in a company name, various documents are required to confirm the company has the ability to borrow this money, has authorized the covenantors (because you will need covenantors whenever a mortgage is in a company name) to borrow funds on behalf of the company, has authorized the covenantors to sign on behalf of the company, financial statements proving the company has a positive cash flow, etc etc.
Aside from the above, there are not really any issues regarding a non-resident borrower at the time of purchase, aside from the fact that a lender will typically lend you a maximum of 65% of the purchase price; the big issue is at the time of sale - a non resident will have a hefty capital gains tax to pay at that time. For details on capital gains taxes, and the process a non resident goes through when trying to sell a property I would suggest you contact an Accountant, as they have the most up to date information on current tax laws. Another excellent resource is http://centa.com/.

Hope this was helpful,


---------- FOLLOW-UP ----------

QUESTION: Hello Cinzia,

Thanks for your reply.

Im a canadian citizen.  
Do you think if I can registered a business in Ontario, and owned by a foreign company.  And operate it as business in Canada.  

Would it make it easier in the whole process purchasing property?  Or it will look at the owner of this company, rather where the company is registered.

I will report it as business income/expense in Ontario, canada.  This part I will contact account for further details.

So my main concern is would it make it count as canadian business buying property as investment legally.

Thanks for your help.

Jan

Answer
Hi Jan. If you register your company in Canada, then it is not really a "foreign" business. That is to say, you will have business accounts here, you have all the business documents the banks will be looking for (Borrower's Resolutions, Articles of Incorporation, financial statements, etc), etc.

I would recommend you use a mortgage broker to help you through this process; they will ensure you get the best deal, and will be able to get you a pre-approval, so that you need not worry once you find the property you wish to purchase, you will have everything ready to go.
Hope this was helpful,