Filing Requirements for the Sale of Taxable Canadian Property
If you want to sell a taxable Canadian property as a non-resident of Canada, the following is of importance to you.
Your lawyer or the purchaser’s lawyer is required to holdback 25% of the gross sales price of the non-resident’s share of the property in trust pending the issuance of the clearance certificate from the Canada Revenue Agency (CRA).
To request the clearance certificate, Form T2062 – Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canada Property is required to be submitted with supporting documents to the CRA within 10 days after the closing date. Failure to remit the form is subjected to penalties of $25 per day at a minimum of $100 to a maximum penalty of $2,500 per non-resident. It may take a couple of months for the clearance certificate to be issued by the CRA after the application is submitted.
As information about non-resident tax withholdings remitted while the property was rented is asked on the Form T2062, any non-resident withholdings not submitted while the property was rented as well as the arrears interest will be included as part of the required payment from the CRA for the issuance of the clearance certificate. For more information about non-resident tax withholdings while renting out the property as a non- resident of Canada, please refer to the “Filing Requirements for Rental Property owned by Non-Resident of Canada” document.
After your lawyer and the purchaser’s lawyer receive a copy of the clearance certificate for each non-resident seller, the remaining holdback still in trust will be released to the non-resident. In order to only pay the taxes from the taxable capital gain on the tax return, the Income Tax and Benefit Return for Non-Residents and Deemed Residents of Canada must be filed in the subsequent year by April 30th. The amount paid for the issuance of the clearance certificate will be held as an instalment payment under the taxpayer’s Social Insurance Number or Individual Tax Number (ITN) with the CRA. Any overpayment made to the CRA for the clearance certificate issuance will be refunded to the non-resident once the tax return has been assessed.
A Social Insurance Number or an Individual Tax Number is required on the Form T2062. Form T1261 – Application for a Canada Revenue Agency Individual Tax Number (ITN) for Non-Residents can be included with the filing of the Form T2062 to the CRA.