Non-Residents selling property in Canada

Selling

There are some important things to note if you are a non-resident Seller selling your property in Canada or if you are a Buyer purchasing a property from a non-resident Seller.

What is a non-resident?

In a nutshell, non-residents have lived outside Canada throughout the tax year or have stayed in Canada for less than 183 days in the tax year. When selling real estate, the non-resident Seller as well as the Buyer, need to follow certain tax reporting rules set out by the Canada Revenue Agency (CRA). Not doing so could result in penalties for the Seller and risk for the Buyer as the Buyer could be help responsible for any taxes that the non-resident Seller owes.

Obtain a Certificate of Compliance

Non-resident Sellers should advise the CRA at least 30 days before they dispose of property or within 10 days of the sale. Once the CRA has received the necessary documentation and a security (generally 25% of the net capital gain), the CRA will issue a Certificate of Compliance to the non-resident Seller and their lawyer. If you don’t obtain the Certificate of Compliance before the sale closes, the Buyer is entitled to withhold 25% of the proceeds of the sale. This holdback is released once the Certificate is received but if the non-resident Seller needs all of the proceeds of the sale to move on with another purchase, this can be a big hiccup.

It’s always best to get the Certificate of Compliance in advance of the sale and to get professional advice from your accountant.

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