Question 1

What is a Certificate of Compliance and why do non-residents need it?

Accepted Answer

A Certificate of Compliance is an official CRA document confirming that a non-resident seller has met their Canadian tax obligations on the sale of real estate. It is required because Canadian law mandates that the buyer's lawyer withhold 25% (sometimes up to 50%) of the gross sale price until this certificate is issued.

Question 2

How long does the CRA take to process a Certificate of Compliance?

Accepted Answer

The CRA typically takes 6 to 9 months to process a Certificate of Compliance application. During this time, the buyer's lawyer holds the withheld funds in trust until the certificate is issued.

Question 3

Can non-residents get a tax refund after selling Canadian property?

Accepted Answer

Yes, many non-residents receive a tax refund because the 25% withholding is based on the gross sale price, but the actual tax is calculated on only 50% of the capital gain after deducting selling expenses.

Question 4

What expenses can non-residents deduct when selling Canadian real estate?

Accepted Answer

Non-residents can deduct real estate commissions, legal fees, advertising costs, home staging expenses, land transfer taxes, and capital improvements.

Question 5

What happens if a non-resident doesn't apply for a Certificate of Compliance?

Accepted Answer

The buyer's lawyer must send the full 25% withholding directly to the CRA, and you will face a penalty of $25 per day (up to $2,500) plus interest. Your funds remain frozen, and recovering the overpayment becomes a much longer and more complicated process.

Non- Resident Selling

Non-Resident Selling Canadian Real Estate: What You Need to Know