Selling a Canadian property while living abroad isn’t as simple as signing the papers and collecting your money. As a non-resident of Canada, you face special tax rules, and if you don’t follow them, you could face steep penalties and delays in getting your sale proceeds.
At Accounting Montreal, we help non-residents navigate these rules so they can sell property without unnecessary stress or financial surprises.
Step 1: Understand Your Non-Resident Status
For tax purposes, you’re a non-resident if the CRA has determined you’ve severed significant residential ties with Canada. This matters because it triggers a specific set of real estate tax requirements when you sell.
Step 2: Non-Resident Withholding Tax
When a non-resident sells Canadian real estate, the buyer is legally required to withhold part of the sale price, usually 25% of the gross selling price, and remit it to the CRA.
Tip: This is not your final tax. It’s a deposit toward the actual tax owing, which could be lower once expenses and the adjusted cost base are factored in.
Step 3: Obtaining a Clearance Certificate
To avoid having the buyer withhold the full 25%, you can apply for a CRA Clearance Certificate using Form T2062.
- This allows the CRA to calculate tax based on your net gain rather than the gross sale price.
- If approved, the withheld amount can be significantly reduced, or excess amounts refunded after the sale.
Step 4: Reporting the Sale
Even as a non-resident, you must file a Canadian tax return for the year of the sale to report the capital gain (or loss).
- Capital gains are 50% taxable in Canada.
- Foreign tax credits may apply if you’re also taxed in your country of residence.
Reference: CRA – Sale of Canadian property by non-residents
Step 5: Coordinating with Foreign Taxes
Many countries tax foreign property sales as well. Tax treaties between Canada and your country may help reduce or eliminate double taxation, but only if filed correctly.
Example: Avoiding Over-Withholding
Alex, a Canadian expat in Singapore, sells his Montreal condo for $800,000. Without a clearance certificate, the buyer would have to withhold $200,000 (25%). With Accounting Montreal’s help, Alex applied for Form T2062 before closing and reduced withholding to just $35,000, the actual estimated tax owed.
Common Pitfalls
- Not applying for a clearance certificate before closing
- Missing CRA deadlines for filing Form T2062
- Forgetting to file a Canadian return after the sale
- Overlooking treaty benefits for reduced withholding rates
How Accounting Montreal Helps
We:
- Confirm your residency status
- Prepare and submit Form T2062 to reduce withholding
- File your Canadian return after the sale
- Apply tax treaty provisions to minimize total tax paid
- Coordinate with your local tax advisor abroad
Selling Canadian property as a non-resident requires careful planning and paperwork. Done right, it can save you from overpaying thousands in withholding tax.
Contact Accounting Montreal today for expert guidance on selling your Canadian property from abroad.
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