Selling Canadian property and T2062

Fructose · Post by **Fructose** » Mon Apr 30, 2012 11:23 pm

This page says that Canadian non-residents selling real estate must pay %25 tax on the gross sale price.
But that can reduce to %25 of the capital gain if they FIRST submit a T2062 form.

Does this mean if a non-resident doesn't fill in a T2062 before selling a property they must pay %25 of the sale price and they cannot subsequently retrieve that?

nelsona · Post by **nelsona** » Tue May 01, 2012 7:21 am

They would retireive it on their tax return at the endo f the year.

Much nbetter to file the form ahead of time, no?

Fructose · Post by **Fructose** » Tue May 01, 2012 10:55 am

So it would seem, but my property is already on the market and I only heard about withholding tax for the first time a couple of days ago.

So if it takes a several weeks to get the T2062 form processed (as it seems it might) and I receive an offer on the property before then, then I'm trying to understand what the consequences of that are.

nelsona · Post by **nelsona** » Tue May 01, 2012 11:26 am

The BUYER is the one responsible for withholding any tax. Its the certificate that permits him not to withhold. All buyers of property owned by a non-resident MUST withhold 25% of gross. If your T2062 form is pending, the 25% gross should be kept in escrow until the certiciate is issued. The certificate will tell the BUYER how much he has to send to CRA (if any) and the lawyer will release the rest to you at that time.

Be it early or late, you MUST submit this form, or face a $25/day penalty. And regardless of how much or how little tax is withheld, you must file a tax return at year-end to calculate the TRUE tax on your sale, if any.

Fructose · Post by **Fructose** » Tue May 01, 2012 12:04 pm

I know its the buyer's responsibility, but I thought the end result was that the seller does not receive the full amount that the property is listed at. And it is that which I of course am interested in.

Therefore if I don't have the certificate at time of sale then I won't receive 25% of the sale price (though I might get it back later, but maybe not until after filing 2011's tax return?), if I do have the certificate then I won't get 25% of the capital gains on the sale. This has consequences if I want to use the proceeds from the sale towards buying another property in a timely manner but 25% of it is withheld.

If it doesn't work this way then how does it? I've read the cra's documents but they are not very clear imho.

Fructose · Post by **Fructose** » Tue May 01, 2012 12:12 pm

Thanks for the replies by the way.

nelsona · Post by **nelsona** » Tue May 01, 2012 1:08 pm

That IS how it works. That is the price you pay for being non-resident.

And to be clear. It isn;t 25% of the capital gain, it is 25% of the net gain WITHOUT any expenses or outlays accounted for.

For good measure the buyer's lawyer will usually put 25% of the entire proceeds in escrow, until the actual withholding cert is issued, and then remit what the govt asks, and then give you the rest.

quick example:

You sell your home for $400K. You figure out you owe $10K of cap gains tax after expenses, but $15K before expenses. The lawyer puts $100K in escrow, until certificate is issued. At tha tpoint he sends CRA $15K, and gives you the $85K. At year end you file your return and get back the remaining $5K.