Selling Canadian Property as a Non-Resident? Don’t Skip the CRA Certificate of Compliance

Nexus Accountants + Advisors
Mar 29
3 min read

Updated: Apr 5

Understanding the CRA Certificate of Compliance for Canadians with Non-Resident Property Dispositions

When a non-resident of Canada sells real estate or certain types of Canadian property, they must comply with specific tax rules enforced by the Canada Revenue Agency (CRA). One of the key requirements in such transactions is obtaining a Certificate of Compliance. This certificate is crucial to avoid hefty tax withholding and penalties. In this article, we'll break down what it is, who needs to file it, the filing process, deadlines, and how tax withholding works.

What Is a CRA Certificate of Compliance?

The Certificate of Compliance is a document issued by the CRA under section 116 of the Income Tax Act. It confirms that a non-resident seller has complied with their Canadian tax obligations relating to the disposition (sale or transfer) of taxable Canadian property.

This certificate serves as proof to the buyer that the seller has met the required tax reporting, which allows the buyer to reduce or avoid tax withholding on the sale proceeds.

Who Needs to File for a Certificate of Compliance?

A Certificate of Compliance must be requested by a non-resident of Canada who disposes of:

Real estate located in Canada
Shares of a private Canadian corporation (subject to specific conditions)
Certain business assets or other types of taxable Canadian property

The obligation applies even if the property is sold at a loss or no tax is ultimately owed.

Buyers Have Responsibilities Too

If the non-resident seller fails to obtain a Certificate of Compliance, the buyer may be held liable to remit a portion of the purchase price (usually 25% to 50%) to the CRA. To avoid this risk, buyers typically insist on seeing the certificate before releasing the full payment to the seller.

When Does It Need to Be Filed?

The CRA has strict deadlines for filing:

The request for a Certificate of Compliance (Form T2062 or T2062A) must be filed no later than 10 days after the date of the disposition (closing date).

Failing to file on time may result in a penalty of $25 per day, up to a maximum of $2,500.

Important Forms:

Form T2062 – For the disposition of taxable Canadian property
Form T2062A – For dispositions where the gain was previously deferred, such as under a Section 85 rollover or Section 97 partnership transfer

Tax Withholding Requirements

In most cases, the buyer is required to withhold and remit tax to the CRA on behalf of the non-resident seller, unless a Certificate of Compliance is obtained in time.

Standard Withholding Rates:

25% of the gross sales price for most property
50% of the gross sales price for certain types of property (e.g., depreciable property or business assets)

Reduced Withholding

If the seller obtains a Certificate of Compliance, the CRA may authorize a reduced withholding, typically based on the net gain rather than the gross proceeds.

For example, if a non-resident sells a Canadian property for CAD 500,000 with an adjusted cost base of CAD 400,000, CRA may require withholding on the CAD 100,000 gain rather than the full sale price.

What Happens After Filing?

Once the CRA receives the completed forms and required documents, they will review and issue a Certificate of Compliance (Form T2064 or T2068). The seller may then provide this certificate to the buyer or the buyer’s lawyer to confirm the CRA’s withholding instructions.

Documents Required to File

When applying for a Certificate of Compliance, the seller must include:

A completed Form T2062 or T2062A
Copy of the sale agreement
Proof of the adjusted cost base (purchase documents, invoices for improvements)
Statement of proceeds of disposition
Payment of estimated tax owing (if applicable)
Authorization forms if someone is filing on the seller's behalf (e.g., Form T1013 or RC59)

Final Tax Return Filing

Even after obtaining the Certificate of Compliance and paying any required withholding tax, the non-resident seller must still file a Canadian income tax return for the year of disposition. This allows for the calculation of the actual tax liability, and the seller may be entitled to a refund if the tax withheld exceeds the final tax owed.

The CRA’s Certificate of Compliance process is a critical step for non-residents selling Canadian property. Not obtaining the certificate on time can lead to significant penalties and complications for both the buyer and seller. Working with a tax professional experienced in cross-border compliance can help ensure a smooth and timely filing process.