If you live outside Canada and sell real estate here, the CRA expects to hear about the sale within days of closing, long before your tax return is due. If you skip that step, the buyer can become liable for part of your tax and can hold back part of the purchase price to cover it.
What this applies to
These rules come from section 116 of the Income Tax Act and apply when a non-resident disposes of taxable Canadian property. That includes real property in Canada, such as a house, condo, rental building or land. It can also include some shares and other interests that, at any time in the previous 60 months, got more than half their value from Canadian real estate or certain resource or timber property.
Telling the CRA about the sale
You notify the CRA with Form T2062, Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property. You can send it any time before a proposed sale, or after the actual sale. Notice of an actual sale is due within 10 days after the property is disposed of.
- Missing the 10 days costs $25 a day, with a minimum of $100 and a maximum of $2,500.
- Some property is handled under a separate subsection, 116(5.2): depreciable property (such as a building you've claimed capital cost allowance on), real estate you hold as inventory rather than capital property, Canadian resource and timber property, and life insurance policies in Canada. These are reported on Form T2062A or T2062B, and the 10-day deadline doesn't apply to them.
- You need a Canadian tax number. If you never had a SIN, apply for an Individual Tax Number on Form T1261, sent separately and ahead of your notice.
- You can mail the form to the CRA Centre of Expertise for the region where the property is, or submit it online through My Account.
The payment and the certificate of compliance
Along with the notice, you pay an amount on account of tax or give the CRA acceptable security. For capital property it's 25% of the amount by which the sale price exceeds your adjusted cost base. Selling costs don't reduce that figure, but they do come off your gain when you file your return. For the property types under subsection 116(5.2), the payment is an amount the CRA finds acceptable.
Once the CRA is satisfied, it issues a certificate of compliance: Form T2064 for a proposed sale, or Form T2068 for an actual one. If the facts or amounts of the final deal differ from what you reported for the proposed sale, you send an updated form along with any extra payment or security.
If there's no certificate
When no certificate is issued and the property isn't excluded property, the buyer may become liable to pay tax on your behalf. The buyer can hold back 25% of the amount by which the price exceeds the certificate limit, if there is one. For the property types under subsection 116(5.2), the rate is 50%. Either way it's worked out on the price, not on your gain.
Filing a Canadian return for the year of sale
Generally, selling taxable Canadian property means you have to file a Canadian return for that year. Non-resident individuals file by April 30 of the year after the sale and attach Copy 2 of the certificate of compliance. The return is where your actual tax gets settled. What you paid with your notice is only an amount on account. Our post on capital gains covers how the gain itself is worked out.
You don't have to file if all of these apply: you're a non-resident, no tax is payable for the year, you don't owe anything for earlier years, and every Canadian property you sold was either excluded property or one where no payment or security was required for a certificate.
If you also rented the property out while living abroad, that income has its own rules, covered in our post on filing as a non-resident.
How we help
Filing for non-residents and selling property as a non-resident are both on the list of things we handle. We work with clients around the globe, and most of it happens online. With your authorization, our CRA advocacy work covers speaking to the CRA on your behalf and answering their letters.