Buying a House in Canada While Living Abroad: Tax and Residency

Can a non-resident Canadian citizen buy a house in Canada?

Yes. The federal ban on buying residential property applies only to a "non-Canadian", and the Act's definition leaves out Canadian citizens, people registered under the Indian Act and permanent residents, wherever they live. Living abroad does not make a citizen or permanent resident a non-Canadian under that Act. A permanent resident stays outside the ban only while they keep that status, which can be lost after a final finding that they did not meet the residency obligation (IRPA s. 46). The ban can also cover a corporation, including a Canadian one controlled by non-Canadians. Finance Canada extended the ban to January 1, 2027; check whether it has been extended again before relying on that date.

The ban is not tax law. The tax questions start once you own the home:

What makes a case not simple: a spouse who is neither a citizen nor a permanent resident, a permanent resident who has spent most of the last five years abroad, buying through a corporation, renting the home out and then moving in, or other ties to Canada already in place. Each changes either who may buy or how the home is taxed.

What to gather now: your residency evidence (departure date, foreign home, where your family lives), the purchase agreement and closing statement, and your plan for the home: rent it, keep it for visits, or move in.

Does owning a house in Canada make me a resident?

Owning a home does not by itself make you a Canadian tax resident, but a home kept available for your use while you are abroad is one of the ties the CRA calls significant. Folio S5-F1-C1 (¶1.11–1.12) lists a dwelling, a spouse or common-law partner and dependants as ties that almost always count.

A home leased to someone else on arm's-length terms is treated differently. The Folio (¶1.26–1.27) says a non-resident who buys a home to move into later and leases it to a third party on arm's-length terms may not have a significant tie from that home, if there are no other residential ties. A home kept furnished and empty for your visits does not get that treatment. A below-market lease to a relative is weaker; the Folio accepts it mainly for people never before resident in Canada.

Residency is decided on all your ties together, and a tax treaty can settle a case where two countries both claim you. See Canadian tax residency for the full test and the tie-breaker.

Can I use my FHSA or the Home Buyers' Plan while living abroad?

No. Neither plan can fund a home bought while you are non-resident:

Money taken out of an FHSA while non-resident is a taxable withdrawal, with 25% withheld unless a treaty lowers it. Both plans also require that you are a first-time home buyer and that the home was not bought more than 30 days before the withdrawal (section 146.6, section 146.01). So a home you buy while abroad can never be funded from either plan, and while you live in it, and for four calendar years after, you are not a first-time buyer. To use them, move back first and buy after. For an FHSA you already hold, see your FHSA when you leave Canada.

What tax applies if I rent it out until I move back?

Canada taxes rent paid to a non-resident at 25% of the gross rent, withheld by the tenant or your agent. A section 216 return lets you pay tax on net rent instead, after expenses (T4144). The return is generally due within two years after the year the rent was paid, or within six months after the year if your agent withheld on net rent under an approved NR6. If nothing was withheld and you miss that deadline, the CRA assesses the non-resident tax against you.

One choice on that return matters later: claiming capital cost allowance (depreciation) on the building blocks the election that lets you move in without a deemed sale (see the next section). The forms, NR6 and deadlines are in non-resident landlords.

Do my years abroad count for the principal residence exemption?

No. Under section 40(2)(b), only years you were resident in Canada count toward the exemption. The formula's usual extra year ("one plus") applies only if you were resident in the year you bought the home, so a home bought while non-resident loses it.

Two more rules apply when you move back:

• Moving back does not reset the home's cost. On becoming resident, most property is treated as bought at its value that day, but Canadian real estate is excluded (section 128.1(1)(b)). The home keeps what you paid.
• Turning a rental into your home is a deemed sale. Section 45(1) treats the change of use as a sale and buyback at that day's value. Section 45(3) lets you elect out of it, but the election is unavailable if capital cost allowance was claimed on the property.

Which route costs less depends on the gain and the years. The election can be filed as late as the filing-due date for the year you sell, or within 90 days of a CRA demand if that comes first; but without it the deemed sale belongs on the move-in year's return, so settle the choice before that return is filed. For the full arithmetic, see selling your home after leaving Canada and the principal residence exemption. For the first-year return, see returning to Canada after years abroad.

Is there an Underused Housing Tax or vacancy tax?

No. The CRA says the federal Underused Housing Tax does not apply for 2025 and later years; it covered only 2022, 2023, and 2024. Citizens and permanent residents who owned in their own name were excluded owners anyway.

Provinces and cities run their own land transfer, speculation and vacancy taxes. Their rates, exemptions and residency tests vary by place and sometimes by citizenship; check the rules where the home is before you buy.

What if I sell before I ever move back?

A non-resident seller must notify the CRA within 10 days after the sale and get a certificate of compliance (CRA). Without the certificate, the buyer may hold back 25% of the price, or more on a rented building. A home never lived in while resident gets no principal residence exemption, so none of the gain is sheltered by it, and any capital cost allowance claimed while it was rented is added back to income (section 13). Rates, forms and getting the holdback back: non-residents selling Canadian property.

What should I record when I buy?

Keep a file from day one; you may need it years later on a section 216 return, at move-in, or at sale:

• Purchase agreement, closing statement, legal fees and land transfer tax paid (these form the cost)
• Possession date, and the date you became non-resident and later resident again
• How the home was used each year: rented, empty, used on visits, lived in
• Leases, rent received, expenses and any capital cost allowance claimed
• An appraisal or other evidence of value on the day the use changes
• Capital improvements, with invoices

Example

These examples are illustrative and use Canadian dollars.

Citizen in Singapore who rents first, then moves back

A citizen buys a C$700,000 condo in year 1 and leases it at arm's length for C$2,500 a month.

• Years 1 to 3: C$30,000 of rent a year. The tenant, or the citizen's agent in Canada, withholds C$7,500 (25%) a year. With an approved NR6 the agent withholds on net rent instead; either way, a section 216 return settles the tax on net rent and refunds any excess. The leased condo is unlikely to be a significant residential tie on its own.
• Year 4: the citizen moves back and moves in. The change from rental to home is a deemed sale at that day's value, unless a section 45(3) election is made (possible only if no capital cost allowance was claimed).
• Year 10: the condo is sold. With the 45(3) election, years 4 to 10 can be designated if no other home is designated for them: 7 of the 10 years owned. Bought while non-resident, the condo gets no extra year, so about 30% of the whole gain is taxable. Without the election, the gain from years 1 to 3 is taxed in year 4, and the condo counts as bought again while resident, so the extra year applies and the later gain is generally covered. Which costs less depends on how the value moved before and after year 4.

Permanent resident in Dubai who keeps a home for visits

A permanent resident buys a C$500,000 townhouse and keeps it furnished for an annual visit. The townhouse is available for use, so the CRA will usually treat it as a significant residential tie, weighed with any spouse, dependants or other ties in Canada. A spouse or dependants living in it would be further significant ties.

Citizen abroad with an FHSA

A citizen opened an FHSA before leaving and holds C$30,000 in it. The citizen cannot use it for a qualifying withdrawal while non-resident. Taking the money out now is a taxable withdrawal with 25% withheld unless a treaty lowers it. Buying only after moving back keeps the qualifying-withdrawal route open, if the citizen still meets the first-time buyer test then; buying the home now, while abroad, closes that route for this home.

Different for you?

• Your spouse is neither a citizen nor a permanent resident: the Act exempts a non-Canadian buying together with a citizen or permanent resident spouse (s. 4(2)); confirm title with whoever closes the purchase. How joint ownership is taxed once you own it: individual tax help.
• You want your corporation to buy it: a corporation can count as a non-Canadian under the ban, and a home your corporation owns raises its own tax questions; see a home owned by your corporation and get individual tax help before signing.
• You will rent first and move in later: the capital cost allowance and section 45(3) choices are hard to undo; plan them with individual tax help and see non-resident landlords.
• The home could tip your residency: test your ties in Canadian tax residency, and get individual tax help if a spouse, children or other ties remain in Canada.
• You are moving back this year: see returning to Canada after years abroad.
• You are selling as a non-resident: see non-residents selling Canadian property.
• You are a Canadian buying in the US instead: see how a Canadian should own US property.