I have been reading about selling a home in Canada as a Non-Resident and it states that if you’re a non-resident you need a clearance certificate from CRA and that if one is not obtained that a 25% of the purchase price is withheld at closing.
My question is that during closing on a house in Canada how does the Attorneys handling the closing for the buyer and Seller know if the seller is a Resident or Non-Resident?. What do they check to find this information out or do they check at all?.
I will be a resident when my house sells, but the next day we will be moving to the US where we will be closing on our new home. What if we had moved from Canada the Day before closing our house in Canada we would become Non-Resident one day before closing, would we then need this clearance certificate from CRA and again how would the lawyers no this to withhold the 25%.?.
Selling Home in Canada Clearance Certificate from CRA
Moderator: Mark T Serbinski CA CPA
Those selling their homes at the same time they move are fine, particularly since you will be filing a return this year anyways.
The certificate and the withholding are to ensure that CRA gets their share of any real estate cap gains from those over whom they have little control.
US has the same type of policy for its non-residents.
I wouldn't worry about this.
The certificate and the withholding are to ensure that CRA gets their share of any real estate cap gains from those over whom they have little control.
US has the same type of policy for its non-residents.
I wouldn't worry about this.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks Nelsona
As you said I shouldn’t worry about this but I’m Still I’m wondering if it is standard practice for lawyer prior to closing to check to see if the seller is resident or Non-Resident. If they do how is this done?
Or Do they only check when they find something that would tip them off. I guess the safest thing is just to talk to my lawyer.
Thanks Again.
As you said I shouldn’t worry about this but I’m Still I’m wondering if it is standard practice for lawyer prior to closing to check to see if the seller is resident or Non-Resident. If they do how is this done?
Or Do they only check when they find something that would tip them off. I guess the safest thing is just to talk to my lawyer.
Thanks Again.
And What if Someone is Truly a Non-Resident has been out of Canada for the past year or two and then sells his house in Canada, but doesn’t say anything to his attorney how would they know?. This 25% with holding would devastate allot of people that have a mortgage to payoff, and where unaware of this law That they needed a Clearance certificate.
"Devestate is a strong word. This is merely withholding, not tax. It wi=ould be recouped at year end.
If the seller doesn't mnetion he is non-resident, that would be like not informing your surgeon that you are diabetic or allergiuc to penecillin.
If the seller doesn't mnetion he is non-resident, that would be like not informing your surgeon that you are diabetic or allergiuc to penecillin.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
The reason I say Devastate is it could cause delays in closing, because the seller with a mortgage that needs all the proceeds to discharge their mortgage this would be a problem if they decide to withhold 25% of the sale price.
If someone had no Mortgage to pay off or had only some mortgage to pay off, I would agree that 25% of the sale price would be more of an inconvenience.
If someone had no Mortgage to pay off or had only some mortgage to pay off, I would agree that 25% of the sale price would be more of an inconvenience.
I have gotten further clarification for my lawyer and my realtor as to the closing process on a house in Canada and determining Non-Resentence & Residence.
1.)At the lawyers you have to sign an affidavit which states that you are a resident of Canada
2.)You now have to be also ID'd by the lawyer which he photocopies, such as a drivers license with photo and address on it .
1.)At the lawyers you have to sign an affidavit which states that you are a resident of Canada
2.)You now have to be also ID'd by the lawyer which he photocopies, such as a drivers license with photo and address on it .
The lawyer for the purchaser does this due diligence because the **purchaser** is on the hook for the 25% withholding tax. It often happens that the seller's lawyer will get the affadavit on behalf of the other lawyer.
Just to clarify, a T2062 (and/or T2062A if the proeprty was depreciated in a prior year, i.e. was a rental) **must** be filed no later than 10 days after the closing of the transaction. With this form, you calculate the required withholding tax, i.e. 25% of the gross gain before considering such things as legal fees and real estate commission.
Right now, the processing of the T2062 is taking 6 - 8 months in Ontario, so it's very important to file this as early as possible. While you wait for the clearance certificate to be issued, the 25% of the gross **proceeds** will be sitting in the buyer's lawyer's trust account. It's advisable to ask CRA with your T2062 filing that they issue the lawyer a "comfort letter" allowing him to keep the withholding in the trust account. That's because the legislation actually requires that the withholding be remitted to CRA no later than the end of the month that follows closing.
Once the clearance certificate is issued, and if it is for a lower amount than was withheld, the buyer's lawyer will remit what is required to CRA and then release the balance to the seller.
Just to clarify, a T2062 (and/or T2062A if the proeprty was depreciated in a prior year, i.e. was a rental) **must** be filed no later than 10 days after the closing of the transaction. With this form, you calculate the required withholding tax, i.e. 25% of the gross gain before considering such things as legal fees and real estate commission.
Right now, the processing of the T2062 is taking 6 - 8 months in Ontario, so it's very important to file this as early as possible. While you wait for the clearance certificate to be issued, the 25% of the gross **proceeds** will be sitting in the buyer's lawyer's trust account. It's advisable to ask CRA with your T2062 filing that they issue the lawyer a "comfort letter" allowing him to keep the withholding in the trust account. That's because the legislation actually requires that the withholding be remitted to CRA no later than the end of the month that follows closing.
Once the clearance certificate is issued, and if it is for a lower amount than was withheld, the buyer's lawyer will remit what is required to CRA and then release the balance to the seller.
Signing the affidavit simply releases the lawyer’s from any legal ramifications, but still leaves the Non-Resident paying penalties up two $2,500 for not filing the T2062 form.
It seems much easier less complicated to sell your home while you’re a resident and then move. Rather then Moving becoming a Non-Resident and then selling your home.
Although this 25% is not a tax, but a withholding, I can see where it would cause hardship if there is a mortgage that has to be discharged.
It seems much easier less complicated to sell your home while you’re a resident and then move. Rather then Moving becoming a Non-Resident and then selling your home.
Although this 25% is not a tax, but a withholding, I can see where it would cause hardship if there is a mortgage that has to be discharged.
As I said earlier, since you are in the process of moving, it is difficult to say when you are resident or not. The sale of your house may be the trigger.
Besides, You will put thedeparture date on your return MONTHS later, and you can back that up with your new job, etc.
Until I had a paper from CRA stating that I was non-resident, or had submitted same, and still ahd all my provincial docs, I would without hesitation sy that I am resident.
Besides, You will put thedeparture date on your return MONTHS later, and you can back that up with your new job, etc.
Until I had a paper from CRA stating that I was non-resident, or had submitted same, and still ahd all my provincial docs, I would without hesitation sy that I am resident.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best