What is a property tax clearance certificate? Non-Resident Canadian Tax Clearance Certificate?
Non-residents are required to pay withholding taxes when selling Canadian real estate. When selling a property, you must comply with the tax declaration set by the Canada Revenue Agency (CRA). This means that you must submit all taxes and apply for a tax clearance certificate immediately after the property is sold. Tax clearance certificate , the purchaser of your property may be forced to withhold part of the sales proceeds (up to 50% of the sales amount).
What is a property tax clearance certificate?
When a non-tax resident sells a Canadian property, the lawyer will ask the seller to provide a tax clearance certificate, otherwise the seller will not be able to obtain all the proceeds from the sale in time. So what is a tax clearance certificate? A tax clearance certificate is a prepayment tax certificate that a non-tax resident of Canada actively applies for and obtains from Canada when selling a property. The tax clearance certificate is usually applied for by the seller's accountant. After the tax bureau approves it, the seller's accountant will pass the tax clearance certificate obtained from the tax bureau to the seller and his lawyer, so that the seller's lawyer can pay the seller the sale amount in time.
As a non-tax resident, if you do not have a tax clearance certificate or have not obtained a tax clearance certificate, the lawyer will withhold 25% of the sale price as a deposit (up to 50% of the sales amount).
Why do I need a tax clearance certificate?
- The Canada Revenue Agency has very direct requirements for non-tax residents to clear taxes when selling a property: the application for a tax clearance certificate must be submitted within 10 days of the sale of the property, otherwise you will face a fine of $25 Canadian dollars per day, up to a maximum of $2,500 Canadian dollars in total.
- The time required for tax clearance approval by the tax bureau is unstable. Currently, the approval cycle of the tax bureau is 3-4 months, and the speed depends on how early or late you submit your application to the tax bureau through your accountant.
- Sometimes, some tax residents may be questioned by lawyers when selling their houses because their situations are too complicated. It also takes time to determine whether they are tax residents or non-residents. Therefore, you should apply for tax clearance as early as possible. In addition to avoiding fines, you can also get your deposit back as soon as possible.
What is the service fee for tax clearance certificate?
- Apply for ITN (Individual Tax Number for Non-Residents) $100 + tax
- Tax clearance application $300
- The last tax refund of the following year (regarding tax-cleared properties) $300
What documents are needed to apply for a tax clearance certificate?
- Apply for ITN (Individual Tax Number for Non-Residents)
- Copy of passport and address outside Canada
- House purchase contract
- Lawyer documents when buying a house
- House sale contract
- Deductible expenses related to the sale of a home (lawyer fees, agency fees, accounting fees, renovation or repair costs, transportation costs, home furnishing costs)