How we help
- Taxable-Canadian-property classification under ITA s. 248(1) and 116
- Form T2062 (or T2062A for depreciable property) preparation
- Pre-closing certificate applications to reduce purchaser withholding
- Post-closing variance reconciliation with the final T1 / T2
- Coordination with treaty-based reduced-rate positions
- Application for refund where the clearance was over-conservative
The Section 116 rule
Section 116 of the Canadian Income Tax Act imposes a notification and withholding regime when a non-resident person disposes of "taxable Canadian property" (TCP). TCP includes Canadian real or immovable property, Canadian-resource property, timber resource property, shares of corporations that derive more than 50% of their value from Canadian real property over a 60-month look-back, and partnership interests whose value is similarly derived.
The non-resident vendor must notify the CRA of the disposition (Form T2062 — or T2062A for depreciable property) within ten days of the disposition. Within the same window, the vendor must remit 25% of the estimated gain (or 50% for depreciable or certain other property), or post security in a form acceptable to the Minister. Once the CRA is satisfied, it issues a clearance certificate showing the "certificate limit" — the amount on which withholding has been satisfied.
If the vendor does NOT obtain a clearance certificate, the purchaser becomes secondarily liable and must withhold 25% (or 50%) of the GROSS sale price and remit it to the CRA. The purchaser is the agent of the CRA for this purpose, and the withholding is enforced.
Pre-closing certificate
The standard play is to file Form T2062 well before closing — ideally 30+ days in advance — so the clearance certificate is in hand by the closing date. The purchaser then withholds only on the gain (not the gross), and the vendor walks away from closing with most of the cash that would otherwise have been held back.
CRA processing of T2062s is famously slow. For a vendor selling in a busy season, applying 90+ days ahead of the expected closing date is the safe practice.
Post-closing variance
The certificate limit is based on the estimated gain at the time of application. The vendor's actual final tax for the year of disposition is determined on the regular T1 (for individuals) or T2 (for corporations) when the return is filed. If the actual tax is less than the certificate withholding remitted, the vendor claims a refund on the return. If the actual tax is more, the vendor owes the balance.
Treaty positions
Where the Canada-US treaty or another treaty reduces the Canadian tax on a particular gain — for example, gain on the disposition of certain shares — the T2062 should claim the treaty position on the same form so the certificate limit reflects the reduced amount. Failing to assert the treaty at the T2062 stage leads to over-withholding that takes another full filing cycle to recover.
How we work the file
For non-resident vendors, we identify whether the property is TCP, prepare and file the T2062 (or T2062A), monitor the CRA's processing, deliver the clearance certificate to the closing agent, and prepare the post-closing T1 or T2 to reconcile the certificate withholding against the actual tax. Where the buyer's closing date is too tight for a pre-closing certificate, we work with the closing agent on the 25% gross hold-back and prepare the post-closing refund claim.
What to expect when you call us
Your first call is a free, no-obligation consultation with a tax lawyer. We will review the details of your situation, explain your options under the Income Tax Act and CRA administrative practice, and give you a clear, fixed-fee quote if you choose to retain us. Your consultation is confidential, and once we are retained, communications are protected by solicitor–client privilege.
If you retain us, we begin work within 24 hours of being retained.
Frequently asked questions
Is the consultation really free?
Yes. Most cases qualify for a free, no-obligation consultation with one of our tax lawyers. During the call we'll review your situation, explain your options, and give you a clear quote if you decide to retain us.
Do you serve all of Canada?
Yes. Barrett Tax Law represents clients across Canada. We have offices and local phone lines in Toronto, Calgary, Edmonton, Fort McMurray, Ottawa, Vancouver, and Winnipeg, plus a national toll-free line at 1-877-882-9829.
What does a tax lawyer do that an accountant cannot?
Accountants prepare returns and financial statements. Tax lawyers represent you when those returns are challenged, audited, or prosecuted — and our communications are protected by solicitor–client privilege, which accountant communications generally are not.
Will the CRA criminally prosecute me?
Most CRA disputes are civil. Criminal prosecution is reserved for serious tax evasion or fraud, usually involving deliberate misrepresentation. If you have unreported income, a voluntary disclosure is one of the standard ways to reduce criminal-prosecution risk.
How fast can you start on my case?
We typically begin work within 24 hours of being retained. For audit deadlines, Notices of Objection, and other time-sensitive matters, we move immediately.
What if I have unfiled tax returns from many years ago?
We routinely handle 5+ years of unfiled returns. Through the Voluntary Disclosures Program — applied for before the CRA contacts you — we can usually eliminate gross-negligence penalties and limit interest exposure.