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When selling property in Canada, apply for a Clearance Certificate. This process can take 2-3 weeks to clear after the closing. This must be submitted within 10 days of closing and can be applied for after conditions have been removed.
If you are selling property situated in Canada, you may be subject to a non-resident withholding tax of 25% of the gross sales price. However, if the property is a depreciable property (e.g. property that earned rental income), then the required withholding would be 50% of the gross sales price.
You may request to have the non-resident tax withheld on the net capital gain on the disposition instead of the gross sales price. This requires filing the appropriate forms with the CRA and also obtaining a Certificate of Compliance
If disposing of real property that you have been renting, you must have filed your Section 216 returns reporting the rental income and expenses up to the date of disposition and have all due taxes paid in full. CRA will issue the clearance certificate only after all your Canadian taxes have been paid, including any taxes on rental revenue.
Even if you choose not to obtain a clearance certificate in advance of the sale, in order to reduce your tax withholding, you will still be required to notify CRA within 10 days of the disposition of the property. If you fail to notify CRA within the 10 day period, you will be assessed a penalty of $25/day for each day the notification is late to a maximum of $2,500.
You are required to file a Canadian tax return for the taxation year in which the disposition took place. You will be able to deduct the adjusted cost basis of the property and receive credit for your expenses of sale, which could result in a refund of a portion of the tax withheld.
If you have any questions, please contact a lawyer, accountant, or CRA for more information.
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