Selling Canadian Commercial Property as a Non-Resident

1. Confirm the vendor, residency and sale perimeter

Identify the registered owner, beneficial owner, tax-reporting person, country of residence, entity type and authorized signing officers. Citizenship, mailing address and tax residency are not interchangeable conclusions. Canadian legal and tax advisors should confirm residency for the closing date and any treaty position.

Define whether the transaction is a direct real-property sale, an asset sale including a business, a partnership-interest transaction, a share sale or another structure. Section 116, GST, title, allocation and closing requirements can differ across those paths.

• Registered and beneficial owner
• Canadian tax identification
• Residency at closing
• Entity and signing authority
• Property and included assets
• Direct, asset, partnership or share transaction

2. Determine whether section 116 applies

CRA identifies Canadian real or immovable property as taxable Canadian property within its section 116 procedures. The vendor's advisors should classify the property, proposed transaction and any exclusion or treaty claim rather than assuming that a commercial label determines the result.

A certificate-of-compliance process is not the same as the final Canadian income-tax return. CRA explains that the payment or security supporting the certificate is credited to the vendor and that final liability is determined when the applicable return is assessed.

3. Select the correct notification and certificate path

CRA directs vendors to Form T2062 for specified dispositions of taxable Canadian property and to Form T2062A for Canadian real property that is not capital property, depreciable taxable Canadian property and other listed property. CRA also notes that some transactions may require both forms.

Have the accountant and counsel select the form, reporting basis and supporting calculation. A brokerage should not characterize land, building, inventory or depreciable-property tax treatment for the owner.

4. Start the certificate file before marketing pressure builds

CRA's section 116 circular says a proposed-disposition notice should be sent at least 30 days before disposition where possible, while an actual-disposition notice is generally required within 10 days after disposition. Those are procedural statements, not a promise that a certificate will be issued within a transaction's preferred closing period.

Create one control calendar for listing launch, offer review, conditions, certificate submission, information requests, payment or security, lender discharge, closing and tax-return work. Counsel should determine how the agreement addresses an outstanding certificate.

5. Build a source-controlled certificate package

CRA's procedures identify vendor and purchaser information, property identification, proceeds and adjusted cost base among the required information, with supporting documents and valuation information where applicable. Missing documents can delay review.

Reconcile title, acquisition agreement, original statement of adjustments, capital additions, CCA schedules, proposed agreement, allocation, sale costs and appraisal or market evidence with the accountant's calculation. The listing price alone does not establish adjusted cost base or taxable gain.

• Current title and legal description
• Acquisition and ownership records
• ACB and CCA continuity
• Draft or executed sale agreement
• Land, building and asset allocation
• Valuation and sale-cost evidence

6. Address purchaser withholding in the agreement

CRA explains that a purchaser can become liable for a specified amount when a non-resident vendor has not complied and a certificate is unavailable, subject to the detailed statutory rules and exceptions. The purchaser is correspondingly entitled to withhold from the purchase price in the circumstances CRA describes.

Counsel should draft the residency representations, certificate covenant, holdback or remittance mechanism, cooperation duties, document delivery and post-closing rights. A requested holdback is not automatically the vendor's final tax payable.

7. Keep GST and income-tax withholding separate

CRA states that a sale of commercial real property is generally taxable for GST/HST unless a specific exemption or deeming rule applies. Registration, non-resident status, purchaser registration, property use and transaction structure can affect who reports and remits the tax.

Section 116 withholding and GST/HST are different legal workstreams. The agreement, statement of adjustments and closing directions should identify each treatment without netting one against the other by assumption.

8. Prepare the property sale at the same time

The certificate file does not replace a commercial sale data room. Assemble title, surveys, planning and permit records, leases, rent roll, operating statements, taxes, insurance, environmental and building reports, capital history, service contracts and material notices according to the asset.

Use staged disclosure and a corrections register. Tax records, beneficial-ownership information and personal identifiers require tighter access than ordinary property marketing material.

9. Reconcile the actual closing and post-closing filing

If the purchaser, consideration, allocation, property or other transaction facts differ from a proposed notification, the advisors should determine what update or actual-disposition filing is required. Preserve the final agreement, adjustments, remittance evidence and certificate correspondence.

The vendor may still need a Canadian return for the disposition year. CRA states that the final tax liability is determined through assessment and that payments or security provided under section 116 are credited to the vendor's account.

10. Define professional responsibility before launch

Commercially can coordinate the property facts, market strategy, qualified-buyer process and transaction information flow. Canadian legal counsel and qualified tax advisors control residency, section 116, treaty, GST, filing, withholding and remittance conclusions.

This guide is general education. It is not legal, tax, accounting or investment advice, does not select a CRA form and does not calculate a certificate amount, holdback, GST obligation or final tax payable.