Canadian non-residents who sell Canadian real property must get a clearance certificate from the Canadian Revenue Agency (CRA). You need a Clearance Certificate before the title of a property is transferred to another party. The certification is not mandatory, but without one, the CRA can hold you liable for any unpaid amounts before or after the distribution of the property.
What is a CRA Clearance Certificate?
A Clearance Certificate is used to confirm that all tax obligations have been paid by a person or entity. The certificate is required once a sale of a business, a change in ownership, or when a person dies occurs.
Example
A Clearance Certificate is commonly required by an estate executor before distributing assets of a deceased’s will. The estate executor may be held accountable for the decedent’s unpaid taxes plus interest if they dispersed assets without a Clearance Certificate and the decedent had personal income tax debts.
Non-resident seller
A non-resident is expected to pay the correct amount of taxes on any capital gain when selling property, according to the Income Tax Act of Canada. Once obtained, you should give the Clearance Certificate to the buyer on or before the closing date to assure the buyer that the correct amount of taxes was paid. If a clearance certificate is not remitted to CRA a penalty of up to $2,500 CDN may be imposed on the seller.
You are a non-resident of Canada if you:
• often live in another country and are not considered a resident of Canada
• do not have significant residential ties in Canada and any of the following applies:
- You live outside Canada throughout the tax year
- You stay in Canada for less than 183 days in the tax year [1]
Steps to obtain a Clearance Certificate:
Step 1 – file an application for a Clearance Certificate
To get a clearance certificate, you need to file the applicable form:
• Form T2062 – Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property
• Form T2062A – Request by Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Canadian Real Property, Canadian Resource and Timber Resource Property or Depreciable Taxable Canadian Property.
• Form T2062B – Notice of Disposition of Life Insurance Policy in Canada by a Non-Resident of Canada
Step 2 – payment of the tax liability as estimated on the clearance certificate
Step 3 – File a Canadian tax return
Footnotes