Please wait, loading...

 

Tax Rulings Associated With Selling of Canadian Property by Non-Residents: Part 2

August 27, 2014

Canadian Property (Section-116)

It is a common misconception that Section-116 applies only to real estate, which is not the case; Section-116 applies to gain from disposal of any ‘taxable Canadian property’ (TCP) which includes but is not limited to:

1. Any real or immovable property (land) situated in Canada; or property used, held, or is part of the capital property of business (in this case non-resident business) carried on in Canada,

2. An interest in a partnership/trust, or a share of a corporation not publicly listed (excluding stocks/shares which are part of mutual funds); if, at any time in the last 5 years, more than 50% of the FMV of the interest, was derived directly or indirectly from one or any combination of the following:

  • Real or immovable property situated in Canada;
  • Canadian resource properties;
  • Timber resource properties, and;
  • Options in respect of, or interests in, or for civil law, rights in a property described in a, b, or c, whether or not the property exists.

3. Share/stock of a publicly-listed corporation, if 25% or more of the issued shares are owned by, or belong to the non-resident taxpayer; and/or persons with whom the non-resident taxpayer does not deal with at arm’s length and more than 50% of the fair market value of the share was derived directly/indirectly from points a. to d. mentioned above.

Additionally, it is possible that the TCP may not be subject to ITA Section-116, such as: if the seller is resident of a country with which Canada has an existing tax-treaty covering Section-116 ruling, or if the property is inventory of a business carried on in Canada (other than real or immovable property situated in Canada, a Canadian resource property or a timber resource property); shares of capital stock of a corporation that are listed on a recognized stock exchange, and etc.

It is highly recommended that any non-resident owner of Canadian property should consult a tax professional before disposing off their property, irrespective of whether it is a TCP or not.

Penalties in case of Non-Compliance

If the non-resident individual fails to apply for a ‘Compliance Certificate’ within 10 days of finalizing the sale, he/she could be liable to the either a penalty of $100 or $25 multiplied by the difference between the 10th day and the day the form requesting for the compliance/clearance certificate was applied for (whichever is greater) to a maximum of $2,500.

AG Tax LLP Can Help

If you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.

Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canadian, and other international tax laws.

We can assist with:

  • Canadian Personal and Corporate tax returns
  • Cross Border Taxation and Business Planning
  • U.S. Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

  • 416-238-5920 (Greater Toronto Area, ON)
  • 604-538-8735 (Greater Vancouver Area, BC)
  • 780-702-2732 (Greater Edmonton Area, AB)

 

Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.

ABOUTAylett Grant Tax, LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
OFFICEVancouver
12752 28th Ave, Surrey, BC, V4A 2P4
OFFICEEdmonton
104–4220 98 St NW Edmonton AB, T6E 6A1
ABOUTAG Tax LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
OFFICEVancouver
12752 28th Ave, Surrey, BC, V4A 2P4
OFFICEEdmonton
104–4220 98 St NW Edmonton AB, T6E 6A1

© AG Tax LLP | All Rights Reserved | Website by Aroma Web Design Vancouver

© AG Tax LLP | All Rights Reserved | Website by AromaWebDesign.com