If I am a non-resident of Canada, and I sell Canadian real estate, what is the procedure for filing tax returns, and paying taxes?

As a non-resident individual who sells a property in Canada, the purchaser of your property will be required to withhold 25% of the proceeds (selling price) at the time of sale ‘disposition’ (which will be given back to you). This is to give non-residents an incentive to pay tax on the capital gain/recapture that may have resulted. You also have to notify the CRA of this proposed, or actual disposition (within 10 days of the sale).

This notification takes the form of filing a T2062 and T2062A. The CRA will then calculate the amount of tax on the capital gain/recapture that is owning based on the submission of the above forms. This may seem like you are paying even more tax (first tax upon purchase, and then tax on capital gains/recapture), but that won’t be the case. Once you pay the tax on the capital gain/recapture, the CRA will issue a ‘Clearance Certificate’, which will serve as sufficient proof to the purchasers to release the withheld funds.

The CRA, by issuing this ‘Certificate’ , is essentially saying that the seller has paid the correct amount of taxes due, and that the 25% of the proceeds that were withheld at the time of sale should be released back to the seller. You will then file a Section 116 return, where you can report the tax paid on the capital gain, and claim expenses that were incurred to sell the property.

ABOUT THE AUTHOR

ALLAN MADAN

CA.CPA.CGA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

Related Resources