Withholding Taxes - CRA - Persons Living Outside of Canada

If you are selling a property in Canada and you do not live in Canada or are not a Canadian resident on the closing date or when the funds are releasable, then you will likely need to obtain a Compliance Certificate from the CRA - Canada Revenue Agency. The lawyer handling your transaction will not be able to release funds unless you first obtain that certificate and give it to your lawyer. If you are planning on selling or have recently sold and are wondering if this applies to you, you should contact the CRA right away. There are penalties and interest that apply to you and also to someone handling the money such as a lawyer if you do not comply so it is far better to enquire early and ensure compliance. A professional tax accountant may also be able to assist. Expect this process to take time so make your enquiries and take action early.

Lawyers are not Able to Judge themselves if you are a Non-Resident

If you live outside of Canada, it is not possible for your Canadian lawyer to know whether the CRA considers you to be a non-resident or not. It depends on information that you need to give the CRA and they will then make that determination. You should not assume that just because you only recently moved or you intend to move back to Canada that it doesn't apply to you. It may very well apply. Therefore you will need to enquire and you may need to provide the certificate. Canadian lawyers are not allowed to transfer funds when the seller lives outside of Canada without complying with holdback provisions. They can be subject to fines or penalties if they ignore the rules.

Applies to Real Estate and Other Properties

This applies to real estate that you own. It can also apply to other property such as the sale of a business, but that is beyond the scope of this article.

Even if the property sold was previously your home, you should be obtaining the clearance certificate. It may be that zero taxes are payable because the sale of your Canadian home is exempt, but you will need to apply for and give your lawyer the certificate anyway.

If you are still living in Canada when your sale closes and you receive your sale proceeds, then if you move to another country later it should not matter, but you should verify this with a tax accountant or the CRA. Remember though that it may take some time after closing before you actually receive the proceeds.

Contact the CRA

Your lawyer is not able to apply for the certificate for you. The best, quickest and least expensive way is for you to apply directly or with the help of a professional tax accountant. Start by contacting the CRA or your accountant. You can visit the CRA's website at https://www.canada.ca. As of July 2020, their an information page (very technical) is at here. A phone number contact page is at here. Also search for t2062 as that is the name of the form you use to apply for the certificate. These pages change very often so it may not be current. If the page is no longer there, look for the search box on the CRA site and make use of it. Lastly, don't expect things to go quickly. I have noticed some of the CRA pages suggest you might get that certificate in about 30 days. As of the time I am updating this, I acted for someone who hired an accountant for help on this. The client applied 24 months ago, and still doesn't have it. There may be reasons for the extraordinary delay, but the point is that you should not expect this to happen quickly. You should apply right away and follow up diligently until you get your certificate.