Non-Resident Sellers of Houses and Condos

If you are a non-resident of Canada for income tax purposes, and you sell a house or condo, there are certain steps that you need to take to fulfill your tax obligations.

Within ten (10) days of the final closing date, you must notify Canada Revenue Agency of the sale of the property. If you do not report the sale, Canada Revenue Agency will likely impose penalties.

Application for a Certificate of Compliance

Depending on the nature of the property being sold, on the sale of the property, an amount of 25% or 50% of the purchase price will be withheld from the seller. These funds are then available to be remitted to Canada Revenue Agency to fulfill the non-resident seller’s tax liabilities for the property sale.

A seller will want to apply to Canada Revenue Agency for a Certificate of Compliance, because the certificate will usually reduce the withholding amount from 25% or 50% of the gross sale proceeds, to being calculated based on the capital gains of the property.

Certificates of Compliance are commonly referred to as Clearance Certificates.

Comfort Letter

It is important to request that Canada Revenue Agency provide a comfort letter. This allows the withheld funds to remain in the real estate lawyer’s bank account until a Certificate of Compliance is issued. Otherwise, the real estate lawyer will need to remit the withheld funds to Canada Revenue Agency within 30 days after the end of the month in which the transaction has occurred.

Conclusion

Applying for a Certificate of Compliance can be a complicated process.

If you need to apply for a Certificate of Compliance, or if you are a non-resident considering your options for selling a property in Canada, we are available to assist.