Canadian (or other international DVC buyers)

[nodes101]

We are currently researching buying into DVC resale. For a trial run we are renting points for a stay later in the year and we've considered buy in because our kids are little and we can see ourselves coming back often for many years. But if its a timeshare, is it considered a real estate purchase? Are there tax implications for Canadians? Are we going to have to file US taxes? Possibly if we decide to sell in the future? Any thoughts or experiences would be very helpful!!

Thanks!!

 

[RoseGold]

Yes, this is a real estate purchase, and in the US, this is can vary by state.

I already pay CA taxes, but I wouldn't subject myself to that unless I absolutely had to, especially with how unstable CA state law is right now. Timeshares seem like a pretty obvious target to me, as a random non-California person on the Internet.

I would definitely be talking to an actual tax professional, and not the Internet.

There is also a known procedure for resale (FIRPTA) which makes buying internationally more challenging. I have personally passed on resale contracts because they are owned abroad, and I don't want to deal with the IRS burden on the buyer (me).

 

[Cyberc1978]

If you at some point need to sell you need to obtain an ITIN number and maybe pay the FIRPTA tax.

The FIRPTA tax states that you need pay 15% in tax of any earnings. Initially 15% of the entire selling price is withheld and if you decide not to apply for an ITIN number those 15% goes to the IRS. If you apply and are able to document that you dont need to pay or maybe your earnings are less that 15% of the entire selling price you will get the 15% back or a portion of them, but it takes a few months after the sale have closed.

Other than that I dont think there are other tax implications - you dont need to pay US taxes, except for those that are part of the annual dues that you pay.

 

[RoseGold]

Other than that I dont think there are other tax implications - you dont need to pay US taxes, except for those that are part of the annual dues that you pay.

There are plenty of horror stories, for BUYERS, about the paperwork going wrong and causing IRS issues. It is the buyer's responsibility, and usually the title company who does this.

This makes resale less appealing to potential future buyers. There is a reason the international sellers are flagged in resale. This is a factor to keep in mind, as a future international sellers.

 

[Cyberc1978]

There are plenty of horror stories, for BUYERS, about the paperwork going wrong and causing IRS issues. It is the buyer's responsibility, and usually the title company who does this.

This makes resale less appealing to potential future buyers. There is a reason the international sellers are flagged in resale. This is a factor to keep in mind, as a future international sellers.

That might have been so in the “good ‘old days.”

I recently sold a contract and I’m international and as per the title company’s recommendation I consulted a firpta consultant who is taking care of everything.

The amount which is withheld I won’t get until IRS issues a certificate saying I’m not supposed to payi anything. The same certificate goes to the buyer for documentation.

 

[SMC23]

I would save yourself the trouble and just buy direct from Disney for this very reason. Been members for a couple years and through our accountant in Ontario have not been impacted by any tax implications whatsoever.

 

[Cyberc1978]

I would save yourself the trouble and just buy direct from Disney for this very reason. Been members for a couple years and through our accountant in Ontario have not been impacted by any tax implications whatsoever.

it does not matter if you buy resale or direct. When you sell the firpta tax isapplicable.

 

[SMC23]

it does not matter if you buy resale or direct. When you sell the firpta tax isapplicable.

Good to know. Thank you.

 

[BLT9664]

I am from Canada too. My home resort is BLT. I purchased the points since 2009. I would suggest you buy direct from Disney as well. There are quite a bit of legal documents involved, which Disney will take care everything for you. Otherwise you need to hire a local lawyer to process those.
DVC is great if you are planning to go often. I went almost every 2 years.
However if your plan is go very occasionally, or if you are the type looking forward to try different resorts but have time restraints, it will be better to look for reservations on the forum.

 

[Wakey]

There’s no problem buying if you’re an international buyer- Cyberc has it spot on.
Also buying from an international seller is desired nowadays as apparently Disney don’t take them ROFR.
Most of the big agencies are now well versed to dealing with the tax issues (which you only have to sort if you ever come to sell and want your 15% back) as there are quite a lot of international buyers and sellers.
In short, don’t worry either buying as an International seller or buying from an international seller.
And no, don’t buy direct from Disney because you are an international buyer- it makes zero difference. In fact if you buy resale, you have just a couple of very simple documents to sign and return by email. Buying direct, you have more documentation to sign.
You don’t need a lawyer, I have no idea where that idea comes from- I’m in the UK. The closing company prep the simple contract which you sign and return with a deposit, when it clears ROFR and estoppel you wire the money to the title companies’ escrow account. Dead simple.
I have 1 direct contract and 3 resale, all very easy to buy.

 

[nodes101]

Thank you all, there's a lot of great information here. Doesn't sound more complex than any typical real estate transaction. Good record keeping would help especially with the FIRPTA and getting back as much of the 15% as possible. I did a little reading on that since the first couple of posts and really seems similar to capital gains taxes I've seen before except the weird withholding of 15% of the total transaction. The most important part is not needing to do annual taxes. The rest seems to be details.


We are excited to try out our first stay later this year. We'll use that to help us decide if it will make sense for us to buy in. It really depends if we plan to come down every second year or more while the kids are growing up. Or it may make more sense to just continue renting points if we don't come down as frequently.

I've heard that Disney doesn't typically exercise ROFR on international sellers as well so i thought that would be a bonus. I wonder if that's because of dealing with FIRPTA as well?

 

[RoseGold]

Thank you all, there's a lot of great information here. Doesn't sound more complex than any typical real estate transaction. Good record keeping would help especially with the FIRPTA and getting back as much of the 15% as possible. I did a little reading on that since the first couple of posts and really seems similar to capital gains taxes I've seen before except the weird withholding of 15% of the total transaction. The most important part is not needing to do annual taxes. The rest seems to be details.

You missed my point. The IRS burden is put on the BUYER to do the paperwork right. If the buyer messes it up, they are in trouble. So, you have to trust that your title company did the paperwork correctly. Do they do this all the time? Sure. Is it right most of the time? Sure. But these are timeshare title companies. I couldn't even get someone on the phone at the (nice) one I used.

This is a real obligation in resale, and I personally have passed on resale contracts because of it. It's not details to me.

 

[nodes101]

oh i didn't mean to gloss over the deails. Details are always important but they are managable with the right help (title company, lawyer, advisor, etc). With the right attention the details can be taken care of. I do get your point it seems your consern is when i would chose to sell i would be at a disadvantage from your point of view because I'd be an international seller. I've been watching the resale markets for a few weeks and it seems many international sales go through but i'm not if the rates are roughly the same rate as domestic or they stay on the market longer.

Also others have noted that because Disney typically (I don't like to say always) passes ROFR on international sellers there are buyers out there that are not concerned with that added burden because they can offer less per point. So I appreciate your view, selling may be more complicated for me if some buyers are wary of international sales, and some buyers may try lowball offers knowing Disney likely wont exercise ROFR. I know I would consider that. So I will factor that into our decision.

Overall I'm fully aware the entire transaction would be more complex from this side of the boarder. There would be issues buying, renting points, managing dues, dealing with currency fluctuations, selling, etc. That's why im asking what other Canadians (and other international owners) have gone through so it can help us in our decision making process. Thanks everyone for the input!

 

[Pek Chee Kian]

I am a International buyer. I have bought 4 resales contracts between 2015 to 2018. All of the contracts were through Fidelity and Timeshare Store. Once the contract was concluded, they send it to a closing company. It took about 2-3 months to complete the whole transaction. I didn’t face any difficulty in any of them at all and I didn’t use any lawyer to get it done.

 

[lawboy2001]

You missed my point. The IRS burden is put on the BUYER to do the paperwork right. If the buyer messes it up, they are in trouble. So, you have to trust that your title company did the paperwork correctly. Do they do this all the time? Sure. Is it right most of the time? Sure. But these are timeshare title companies. I couldn't even get someone on the phone at the (nice) one I used.

This is a real obligation in resale, and I personally have passed on resale contracts because of it. It's not details to me.

It is not a big deal at all. The buyer sends the purchase money to the title company. The title company sends the money to the seller, minus 15% of the purchase monies, which it holds and awaits a clearance certificate from the IRS (if advised by seller and agrees to this) or transfers to the IRS.

Yes people can screw up. But if that stopped you then you wouldn't be doing a real estate purchase of any kind. If the title company sent the 15% to the seller, contrary to the buyers instruction and the requirements of the law, they would be liable for that.

 

[RoseGold]

If the title company sent the 15% to the seller, contrary to the buyers instruction and the requirements of the law, they would be liable for that.

It is the BUYER's responsibility to remit taxes to the IRS. So, sure, this would be a title company mess up, but the buyer is the one who has to answer to the IRS or would be "liable" in your language. The title company is not a party in this transaction, the buyer is. For failing to do it, the buyer can be responsible for the tax.

 

[CanadaDisney05]

It is the BUYER's responsibility to remit taxes to the IRS. So, sure, this would be a title company mess up, but the buyer is the one who has to answer to the IRS or would be "liable" in your language. The title company is not a party in this transaction, the buyer is. For failing to do it, the buyer can be responsible for the tax.

The buyer would be liable to the IRS, but the title company would be liable to the buyer. At the end of the day, there is SOME risk, but I think it's pretty minimal.

 

[MoreTravels]

You may have two issues:

1. IRS will have records on you if you apply for tax refund. You have to provide your Canadian financial info to a foreign government (ie, USA) if you want to get that tax refund.

2. You may have to declare foreign asset ownership to CRA at personal tax time. Remember that is the first question, after if you are willing to provide info to Election Canada? If you say yes, oh well... more explanations to do.

 

[dhenry63]

Hi has anyone from Australia brought DVC we go every year for the past 5 and it seem DVC would be a better deal ?