Content area
Full Text
Obtaining a Certificate of Compliance for a Non-resident
If you have a non-resident client selling "Taxable Canadian Property," you must apply for a "Certificate of Compliance" (clearance certificate) under Section 116 of the Income Tax Act to pay tax at 25% of your net gain before selling costs. ("Taxable Canadian property" includes: real estate, land and buildings, bare land, former principal residence, personal use property, shares, and partnership property.)
The waiting period to obtain a certificate of compliance varies from several weeks to several months, depending on the workload in the non-resident section, so you should apply for it as soon as possible. You can apply as soon as your client has completed the "Interim Agreement for Sale & Purchase," which can be used for either a proposed or completed sale. If for a completed sale, the forms must be filed by registered mail within ten days of the sale.
Under Section 116(5) of the Act, if a clearance certificate is not obtained, the purchaser is required to withhold 25% (50% for a depreciable property) of the gross selling price of the property and remit to the Receiver General on behalf of the vendor within 30 days after the end of the month in which the property was sold. The vendor must then file a Section 115 T-1 Personal Tax Return for the year of the disposition showing the capital gain on disposition (proceeds less adjusted cost base, less selling costs). If the property is sold early in the year, the vendor could wait up to 24 months after the sale to get his/her refund, assuming you file the return as soon...