As a non-resident, you are subject to a non-resident withholding tax of a specific calculation of 25% – 50% of the gross sales price. If disposing of property that you have been renting, you must file returns reporting to CRA the rental income and expenses up to the date of disposition, and paid all of the tax due. Canada Revenue Agency (CRA) will issue the clearance certificate only after all your Canadian taxes have been paid, including any taxes on rental revenue. Any excess money that was withheld will be reimbursed to you after taxes are paid to CRA.
Once your accountant receives a copy of the accepted sales contract they can submit the request for a clearance certificate to the CRA. You will also need to consider if your mortgage is outstanding and the amount, and provide documentation of the original purchase of this property among other supporting documentation. It often takes 4-6 months before the CRA issues the clearance certificate.
If you’re still carrying a mortgage, is will be important to determine whether (after the mortgage is paid out) a hold-back from proceeds is possible (and thus an immediate sales completion could happen) or if a non-resident clearance certificate would have to be applied for and received before the transaction can complete.
If there is a shortfall in proceeds to fund the withholding amount, and in order for the sale to complete prior to issuance of the certificate, you would have the option to transfer funds to Canada into the lawyer’s trust account as ‘security’ until the clearance certificate is obtained. If you dont have the funds for the security then the only option would be to delay the completion of the sale until the clearance certificate is fully processed and issued (4-6 months)
Even if there is no gain on the disposition, between 25% and 50% of the proceeds have to be withheld by the purchaser (held at lawyer’s trust account) until a clearance certificate is received from the CRA. The remainder of the withheld proceeds of the sale is then dispersed back to the seller.
The information described above is general in nature and does not constitute professional advice. We always recommend that you obtain the appropriate accounting, legal or other professional advice before acting on any of the information contained herein.