When real estate situated in Canada is sold by a non-resident, Canadian income taxes will be payable if the selling price is greater than the original cost of the property. Canada has Tax treaties with many countries so please check with your Accountant. A “pre-payment” of 25% of your total capital gain is calculated and submitted with the T2062 form, “Request by a Non-Resident of Canada for Certificate of Compliance Related to the Disposition of Taxable Canadian Property,” to the CRA and must be filed within ten days of the disposition, but preferably sooner. Legal counsel is required to holdback between 25 and 50% of your sales proceeds, in trust, until the CRA has processed the T2062 application for and received the required payment. You may need to plan for this delay in cash flow, particularly if you have a mortgage to retire or other financial commitments.
This clearance certificate may be applied for in advance of the completion date by the vendor, but not until there has been a contract of purchase and sale with all subjects removed. The wait for the certificate is usually 6-8 weeks and once obtained investor will be require to submit 25% of Capital Gain and will be required to submit a Canadian Tax Return. If the certificate is not obtained, the purchaser is required to hold back from the sale proceeds a percentage of the selling price, usually 25%-50%.
The CRA will require documentation at the time of the sale to support the cost of the property being sold. It is important that such documents be kept on file to avoid unnecessary income taxes on capital gains.
Documentation required includes:
- Property purchase documents, usually “Purchaser or Buyer Statement of Adjustments,” and/or assignment documents
- Invoices for all capital type items or improvements that will be sold with the property
- Canadian Customs documentations for goods imported into Canada, which should be requested from Canadian Customs at the time the goods are imported.