As a non-resident, there are specific issues you need to be aware of, as outlined below. We would advise you to obtain specialist legal and accounting advice in relation to your sale.

 

Non-Resident Withholding Tax

As a non-resident selling Canadian real estate, you will be required to remit capital gains tax. In general, this liability amounts to approximately 25% of your capital gain. Your gain is equal to the sale price minus your Adjusted Cost Base (ACB). Your lawyer is required to initially hold back 25% of the total sale proceeds while filing a Clearance Certificate (see below) on your behalf. Once the certificate is received, processed and approved, your lawyer will release the remainder of funds owing to you (the difference between 25% of the total sale proceeds and 25% of your capital gain). Your lawyer will coordinate with an accountant regarding this filing and the costs are typically around $1000 to $1500 plus HST and disbursements.

 

Clearance Certificate

It is a condition for a non-resident who is selling real estate in Canada to obtain a Clearance Certificate from the Canada Revenue Agency (CRA). Prior to the Canada Revenue Agency issuing a Clearance Certificate they will want to collect any tax payable with respect to your property purchase and sale. This will include any tax payable on the rental income from the property which has not already been remitted, as well as tax on the capital gain experienced on the property and if applicable, recapture of capital cost allowance.

 

Delays in obtaining Clearance Certificates are often lengthy (up to 8 weeks).  A seller should contact their lawyer or accountant to request a Clearance Certificate as soon as an offer to purchase the property has been accepted.  If a sale completes before the Clearance Certificate is issued, a percentage of the selling price ranging from 25% to 50% will have to be held back from the seller’s proceeds until a Clearance Certificate is issued.