If real estate is sold by a non-resident, 25% of the gross sale proceeds is obligated to be withheld by the purchaser and remitted to the Canada Revenue Agency (CRA). The withholding tax amount can be reduced if the vendor acquires a Certificate of Compliance from CRA on time.
By filing the form, the withholding tax is calculated as a 25% of the capital gain (i.e. gross sale proceeds less the cost of the property). The capital gain cannot be reduced by any outlays or expenses, such as legal fees or real estate commissions.
Instead, the outlays and expenses can be claimed when the Canadian personal tax return is filed the following year. As well, if there is a difference between the tax amount calculated on the tax return and the amount paid at the time of sale, the difference will either be paid by the vendor or refunded to the vendor by the CRA.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.