Certificate of Compliance

Realease funds held for Non resident Sale of Real Estate in Canada

What is a Certificate of Compliance?

Canadian Property Selling: Keys on desk

If you are a non-resident looking to sell Canadian property (such as a house or condo), Revenue Canada (CRA) will require the buyer to withhold tax equaling 25% of the selling price.

This ensures that the actual taxes owed on the capital gains from the sale can be fulfilled in case you decide not to file the required income tax return reporting the sale. Once you obtain a Certificate of compliance you can present the document to the purchaser’s lawyer holding 25% of Gross Sale proceeds, and they will release the funds minus the amount CRA has request as 25% of the net gain from sale of the property.
Net gain is generally calculated as: Gross Proceeds – Adjusted Cost base of property – Exemptions = Net Gain taxable at 25%

When is T2062 application required?

When a non-resident of Canada sells or disposes of taxable Canadian property. The non-resident selling must apply for it no later than 10 days after the sale. The buyer will request to see the CRA-issued Certificate of Compliance before releasing the excess withholding tax (over 25% of net capital gain) to the non-resident seller.

What is the process for a non-resident of selling a property?

Working women on office desk

Buyer withholds tax equalling 25% of the selling price.

Seller applies for T2062 and provides all supporting documents listed on the form within 10 days after the selling date.

Seller’s lawyer remits withholding tax equaling 25% of the net capital gain to the CRA (out of the 25% of the gross proceeds).

Wait for CRA to issue the Certificate of Compliance

After receiving the Certificate of Compliance, share copies with the buyer and seller’s lawyer. The seller’s lawyer will release the remaining withholding tax in access of 25% of net gain.

At year end file a Canadian income tax return, attaching the CRA-issued Certificate of Compliance to reconcile actual tax payable with withheld tax.

How long does it take for the CRA to issue the Certificate of Compliance?

Following acceptance of a completed T2062 application, It can take up to 4 months for the CRA to issue the Certificate of Compliance.

Hourglass

What information and documentation do I need to complete Form T2062?

T2062 will ask for information including:

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FAQ

Because CRA encounters more instances of non-compliance with tax filing requirements among non-residents (compared to resident taxpayers) and also enforcement is more difficult with non-residents, they want to make sure they have enough security to cover the taxes owed on the property sale upfront in the event that the non-resident does not eventually file the required income tax return to report the sale and pay the capital gains tax.

Form T2062 must be filed with the CRA within 10 days after the property selling date.

Yes, if you do not notify the CRA of the sale within 10 days after the sale, you could face a penalty of $25 for each day the notification is late, up to a maximum of $2,500. In addition, the buyer will not be able to release to you any excess taxes withheld from the 25% of sales proceeds.

No, 25% of the net capital gains is just interim taxes paid, not the final tax obligation.You still need to file a non resident personal tax return at year-end to reconcile the actual tax payable with the tax withheld. And it is in your best interest to do so because you can claim outlays and expenses associated with the sale on the tax return to get back any excess taxes withheld.

You should file a separate T2062 for each disposition. However, if you sell multiple properties to the same buyer at the same time, then you can use one T2062 to report all the dispositions.

In some cases, the CRA may consider waiving penalties or interest under taxpayer relief provisions if there were genuine reasons causing the delay. It’s advisable to contact the CRA and explain your situation.

How much does TMP charge for a Certificate of Compliance?

Basic

Sale one property by non resident of an un-occupied home

$1,300 / +HST

Expert

Sale one property and multiple owners (1-2), rental property and or principle residence

$1,900 / +HST

Premium

Sale of (2-5)multiple properties, Rental, multiple owners (2-4) and or principle residence

$3,000 / +HST

Custom

Please fill in this questionnaire and we’ll get back to you with a quote

$1,500 +HST

Next Steps

Step 1

Please fill in this questionnaire

Step 2

Schedule a consultation with one of our CPAs to receive a final quote and a checklist of the required data

Step 3

Upload requested data onto cloud folder shared

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Markham Office
905-237-6424
675 Cochrane Dr East Tower 6th Floor, Markham, ON, L3R 0B6
Toronto Bay Street Office
416-333-1116
401 Bay Street, 16th Floor Toronto, ON, M5H 2Y4
San Francisco Office
415-366-5667
590 California Street 16th Floor, San Francisco, CA 94104
New York Office
212-651-9101
555 Madison Ave 5th Floor Manhattan,
NY 10022
Toronto King Street West Office
416-333-1116
100 King Street West, Suite 5600, Toronto, ON, M5X 1C9