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Non-Resident Sale of B.C. Property
To avoid liability for non-resident sellers’ unpaid taxes, purchasers must withhold a portion of the sale proceeds until a non-resident seller has provided a Clearance Certificate from the Canada Customs and Revenue Agency. The holdback is normally 25% but could be higher depending on the use of the property.
A non-resident seller should retain the services of a tax professional to assist in obtaining a Clearance Certificate. This should be done as soon as possible as the process can take six to eight weeks. Under circumstances where the holdback would not leave sufficient funds to payout an existing mortgage at time of closing of the sale, a seller can claim hardship to expedite the issuance of a Clearance Certificate. A Clearance Certificate will only be issued once the tax is paid. Canada Customs and Revenue Agency will review the particular sale transaction to determine whether or not capital gains tax is payable but will also require payment of any other taxes outstanding or payable by the seller.
The seller can claim certain expenses in determining the adjusted cost base including Property Transfer Tax, Goods and Services Tax, legal fees on the original purchase, and any capital improvements made, including strata assessments.. The commission and tax and legal fees on the sale are not deductible for purposes of calculating tax owing at the time of the sale. The seller can claim these expenses by filing a Canadian tax return subsequent to the sale.
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