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September 25, 2015

Are You Selling Property in Canada As a Non-Resident?

Written by: Dagmar Zanic, CPA, CA

With a heavy heart it is now time for you, a non-resident, to sell your property in Canada.

Whether you need to sell a rental property or your family’s cottage beside a beautiful Canadian lake, you may think that negotiating a good price will be the hardest part, but in fact, your troubles may have only just begun!

Selling Property and Capital Gains Tax for Non-Residents

A non-resident selling property in Canada must notify the Canada Revenue Agency (CRA) of the disposition, either before the sale or within 10 days after the sale.

This disposition notification is usually done by filing the Forms T2062 and/or T2062A and paying tax on any gain or income realized.

After CRA reviews the disposition notice and supporting documents, and receives the tax payment, it will issue a Certificate of Compliance to the vendor, a copy of which is then forwarded to the purchaser.

If the purchaser does not receive the Certificate, they are required to remit 25 percent – sometimes up to 50 percent – of gross sale proceeds to CRA within 30 days of the acquisition.

The purchaser is then entitled to deduct this amount from the purchase price.

The tax payment will be credited to the non-resident’s account. Since it does not represent the non-resident’s final tax liability, any excess can be refunded to the non-resident when they file a Canadian income tax return to report the disposition.

The whole process can take a very long time – often many months.

The non-resident’s failure to notify CRA of the disposition will result in penalties of up to $2,500.

As well, a Canadian purchaser could be liable for taxes up to 50 percent of the purchase price if they and the non-resident vendor do not comply with the reporting and withholding requirements.

These are onerous filing requirements. If you need help navigating them, contact one of our experienced tax specialists at Manning Elliott LLP for professional tax advice.

The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.