Non-residents
In situations where the seller of the property is a non-resident of Canada, the buyer’s notary public or lawyer must hold back the required percentage of the purchase price, unless a satisfactory clearance certificate is obtained from the Canada Revenue Agency.
The onus is on the seller to satisfy the buyer’s inquiry that the seller is a resident of Canada.
How Much Is Held Back?
The general rule is:
- If the property has never been income-producing and was occupied by the seller or his/her family for personal use, the holdback is 25% of the sale price. One certificate will be issued per non-resident seller.
- If the property has been income-producing, the holdback should be calculated at 25% of the land value and 50% of improvement value as pro-rated from current assessed values to actual price. One certificate for each holdback will be issued per non-resident seller.
- If the seller is in doubt about the income producing status of the property, he should seek advice from a tax advisor.
When you are a Seller
The residency declaration that you signed will be relied upon. You, as a seller, must understand the significance of the residency question. When in doubt, you must seek advice from your accountant or directly from CRA. The onus is on you to satisfy the purchaser’s inquiry on this point. If you are a non-resident seller, you should apply for clearance as soon as possible, to reduce the potential holdback period.