If you have met all the conditions of being a non-resident of Canada, you will need to ensure that you understand the different taxation rules imposed on you by the CRA and how it will affect your investment.
As a non-resident, you can still invest in Canadian property and depending the nature of the investment, you will be taxed on all income from Canada received by you. Your investment is considered as a passive (nature of your investment) income and will be tax at 25% directly at the source by the tenants as by the Canadian tax law part XIII and XIV.
In other words, when you receive rental income from real or immovable properties in Canada, the payer, such as a tenant or property manager, must deduct non-resident tax at the rate of 25% on gross rental income that You have been paid or credited. The payer is required to remit the tax to the Canada Revenue Agency (CRA) on or before the 15th day of the month following the month in which the rental income was paid or credited to you.
Example of how this works:
As an example, you buy a building of 3 units (none for you if you want to keep the status of non-resident), and rent it for 3 000$ per month (1000$ each unit). The tenants of each unit will have to give 25% of the rent at the Canada Revenu Agency each month and give you the 75%
However, if you make an election under section 216 of the Income Tax Act, you choose to send a separate Canadian income tax return to report your rental income from real or immovable property located in Canada. You could pay tax on your net Canadian rental income rather than on your gross income, and you could pay less tax. You may also be reimbursed some or all of the non-resident tax that was withheld if you make this election.
Capital Gains Tax:
The tax treatment of any gains on the sale of Canadian real estate depends on whether the gain is treated as a capital gain or business income. Generally, if the non-resident is actively buying and selling real estate as inventory, then the operation is likely to be considered a business and will be taxed on the full amount of the gain.
If there is a capital gain, the normal Canadian tax rates will be applied to 50% of the gain for sales. However, a non-resident is required to pay an estimate of the tax before the sale, an amount of 25% of the gain. Upon payment, the CRA will issue a Tax Clearance Certificate to the vendor. If a purchaser does not receive this Certificate from the vendor, the purchaser, is required to withhold tax and remit as tax to CRA 33.3% or more of the gross purchase price from the vendor.
Before April 30th following the calendar year of the sale, the vendor should submit a Canadian income tax return reporting the gain minus the actual selling expenses (sales commission, lawyer's fee, etc..) as this will result in a tax refund of part of the taxes that were paid on closing, back to the vendor.
These are specialized procedures that require experienced tax professionals to ensure the Tax Clearance Certificates are approved quickly and to ensure the lowest amount of tax is paid.