Selling Real Estate as a Non-resident in Canada: A Quick Guide

When a Non-resident individual sells Canadian real estate property, these two things are required:
  • To have a  taxation number
  • To notify the Canada Revenue Agency (CRA) of the disposition of the property

How to secure a taxation number as a non-resident in Canada?

If you are a former Canadian resident, your taxation number will be your SIN. If you don’t have a SIN, you need to apply for a Tax ID Number (ITN). 

Fill out the application form here: T1261 Application for a Canada Revenue Agency Individual Tax Number (ITN) for Non-Residents

How to notify the CRA of the property disposition?

The non-resident seller must notify the CRA about the disposition. Notification is required within ten days of the date the property was disposed of (or proposed disposition).  The seller must complete the applicable notification forms and send them to the CRA, along with the payment or acceptable security to cover the resulting tax payable.

What is the required tax payment involved in selling a real estate property by a non-resident?

The required payment on account of tax or security acceptable to the Minister on the disposition or proposed disposition of property is a flat rate of 25% of the excess of the proceeds of disposition over the property’s adjusted cost base.

When the CRA has received either an amount to cover the tax on any gain the seller may realize upon the disposition of property, or appropriate security for the tax, the CRA will issue a certificate of compliance to the seller. A copy of the certificate is also sent to the purchaser. If the purchaser does not receive such a certificate, the purchaser is required to remit a specified amount to the Receiver General for Canada and is entitled to deduct the amount from the purchase price.

What if the CRA has not issued a Certificate of Compliance?

If the seller does not comply with the requirements of subsection 116(3), and the CRA has not issued a certificate of compliance, the purchaser may become liable under subsection 116(5) to pay a specified amount of tax on behalf of the seller. The purchaser is then entitled to withhold that amount from the purchase price.

The purchaser is liable to pay and remit 25% of either:

a) the cost of the property acquired by the purchaser; or

b) if a certificate of compliance has been issued under subsection 116(2), the amount by which the cost of the property acquired by the purchaser exceeds the certificate limit fixed by a proposed disposition.

Read more about the procedures relating to the non-resident’s disposition of taxable Canadian property here.

What if the non-resident seller failed to notify the CRA of the property disposition?

Non-resident sellers who fail to notify CRA of the disposition within ten days will be liable to a

penalty under subsection 162(7) of the Act. This penalty is $25 a day for each day the notification is late, with a minimum of $100 and a maximum of $2,500.

If you are a Non-resident and thinking/in the process of disposing of Canadian real estate property, please contact YACA.