Non-tax residents: Non-Resident Canadian Tax Clearance Certificate

What is a Non-Resident Canadian Tax Clearance Certificate?

Non-tax residents are subject to withholding tax when they sell Canadian real estate. When selling real estate, it is important to follow the tax filings set by the Canada Revenue Agency (CRA). This means filing all taxes and applying for a tax clearance certificate immediately after the sale of the property. Without a Tax Clearance Certificate, buyers of your property may be forced to withhold a portion of the sale proceeds (up to 50% of the sale amount).

What is tax clearance certificate?

When a non-tax resident sells Canadian real estate, the lawyer will require the seller to provide a tax clearance certificate, otherwise the non-tax resident seller will not be able to obtain all the amount of the house sale in time. So what is a tax clearance certificate? The tax clearance certificate is the prepayment tax certificate that Canadian non-tax residents actively apply for and obtain from Canada when they sell real estate. 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 sale price to the seller in time.

As a non-tax resident, if you do not have a tax clearance certificate or do not get a tax clearance certificate, your lawyer will withhold 25% of the house sale price as a security deposit. (Maximum 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 sell their houses for tax clearance: the application for a tax clearance certificate must be submitted within 10 days after the sale of the house, otherwise you will face a daily fine of $25 Canadian dollars, with a cumulative maximum of $2,500 Canadian dollars.
  • The approval time of the Tax Clearance Bureau is unstable. Currently, the approval cycle of the Tax Bureau is 3-4 months, depending on how soon you submit the application to the Tax Bureau through an accountant.
  • Sometimes, some tax residents may be questioned by a lawyer when selling a house because their own situation is too complicated, and it will take time to determine whether they are tax residents or non-residents. Therefore, you should apply for tax clearance as soon as possible. In addition to exempting you from paying fines, you can also get your security 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 (for tax-cleared properties) $300

What documents do I need to prepare for the tax clearance certificate?

  • Apply for ITN (Individual Tax Number for Non-Residents)
  • Copy of passport and address outside Canada
  • House purchase contract
  • Lawyer documents for buying a house
  • Selling contract
  • Deductible expenses related to the sale of the house (lawyer’s fees, agency fees, accounting fees, decoration or repair expenses, transportation expenses, housing furnishing expenses)
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