Are you a non-resident selling property in Canada? We understand it can be a stressful and complicated experience. That’s why it’s important to know the ins and outs of the regulations before putting your house on the market. When selling your property as a non-resident in Canada you’ll need a certificate of compliance and a portion of the sale proceeds will be held back. Before putting your home on the market, empower yourself with knowledge of the process and requirements to ensure a smooth transaction.

Who is a Non-Resident of Canada?

The Canada Revenue Agency (CRA) has established specific criteria for determining whether an individual is considered a non-resident for tax purposes. You may be a non-resident if you do not have significant residential ties to Canada and you stayed in Canada for less than 183 days in the tax year.

Residential ties include:

  • a home in Canada (owned or leased)
  • a spouse or common-law partner in Canada
  • dependent children in Canada

Secondary residential ties that may be relevant include:

  • personal property in Canada, such as a car or furniture
  • social ties in Canada, such as memberships in Canadian recreational or religious organizations
  • economic ties in Canada, such as Canadian bank accounts or credit cards
  • a Canadian driver’s licence
  • a Canadian passport
  • health insurance with a Canadian province or territory

Determining residence can be complicated. It’s best to seek professional advice from your lawyer or accountant if you believe you may be a non-resident of Canada.

Reporting Requirements for Non-Residents Selling Property in Canada

Any non-resident who sells property in Canada is required to file with CRA a Form T2062 Request for a Certificate of Compliance. You must file the Certificate of Compliance within 10 days of closing the sale. This form is used to calculate withholding taxes due from the buyer at closing. It’s best to have an accountant complete the T2062 on your behalf. It is important that this form is filled out properly and on time.  There are significant penalties and fines if the form is filed late. Once submitted, CRA will typically take around 3-6 months to process the form and issue a Certificate of Compliance.

Withholdings at Closing for Non-Residents

When a non-resident sells property, the buyer is required to withhold a portion of the purchase price. The withholding amount is generally 25% of the purchase price. However, if the property is a rental property, the withholding requirements are 50%. Your lawyer will hold the funds in their trust account until CRA issues the Clearance Certificate.

What Happens if There are Not Enough Proceeds to Make the Withholding?

If the proceeds from the sale do not cover the required withholding amount, the Purchaser cannot complete the transaction. It’s important to ensure that you have sufficient funds to cover the payout of your mortgage and the withholding amount. As you can imagine, this can be a frustrating and costly experience for all parties involved, so make sure you do your diligence and plan accordingly.

Selling your home as a non-resident of Canada can be complicated but understanding all aspects involved can help make it easier for both parties involved in the real estate transaction. Knowing about reporting requirements, and withholdings due from buyers at closing can simplify things when it comes time to sell your property as a non-resident of Canada. It is important that both buyers and sellers familiarize themselves with the specific regulations and laws related to this kind of transaction before moving forward with any real estate transactions involving non-residents of Canada.