It is a condition of a non-resident selling property in Canada that they first obtain a Clearance
Certificate from Canada Customs & Revenue Agency. The current wait for a Clearance Certificate
(October 2001) is approximately 10 to 12 weeks. Prior to Canada Customs & Revenue Agency issuing
a Clearance Certificate they will wish to collect any tax payable with respect to the property -
this will include any tax payable on the rental income from the property which has not already
been remitted as well as tax on the capital gain experienced on the property and if applicable,
recapture of capital cost allowance.
In calculating the capital gain on the property Canada Customs & Revenue Agency allows only the
following to be added to the purchase price to determine the adjusted cost base:
- Property Transfer Tax
- Legal fees and disbursements in conjunction with the purchase Furnishings and renovations included in the selling price;(receipts for the included items will be required). It is critical that you retain receipts for the furnishings and that they identify the furnishings and as having been acquired for the Whistler property as well as any Customs documentation showing furnishings acquired in other jurisdictions have been brought to the Whistler property.
- Goods and Services Tax (GST)
- A portion of the interest on mortgage payments (only if the Vendor has properly elected to have the interest capitalized on their tax return).
Canada Customs & Revenue Agency does not allow any deductions from the selling price in determining
the gain (i.e. you cannot subtract the real estate commission, legal fees or GST paid on the selling).
The amount required to be remitted on the gain is 25 percent of the gain. By filing a Canadian tax
return subsequent to the sale, you can claim expenses such as commission and legal fees and some of
the tax paid may be recovered.
Sellers should contact their accountants or lawyers with respect to requesting a Clearance
Certificate as soon as an accepted offer has been received with respect to the property.
Should the completion date be prior to the issuance of the Clearance Certificate, a holdback
of between 25% and 50% of the sale price will be required by the Purchaser's solicitor until
the Clearance Certificate is issued.
Please note that the Purchasers lawyer may take the position that if the property has been
rented out it is a depreciable property and therefore the holdback is 50% on the portion of
that purchase price that relates to the building.
