Hi Michael,

Yes, you are broadly on the right track, but there are a couple of important distinctions.

If you are a non-resident of Canada selling Canadian rental property, you generally need to file Form T2062 with the CRA within 10 days of the sale, or earlier based on the proposed sale, to request a Certificate of Compliance. The CRA requires payment or acceptable security on account of the estimated tax before issuing the certificate. For capital property, that amount is generally 25% of the estimated capital gain, calculated without deducting selling costs for this particular step.

The 50% figure you mentioned is usually not the amount you personally have to prepay to the CRA on a standard sale of rental real estate. Rather, it refers to the purchaser’s potential withholding exposure on certain types of property if no certificate is obtained. CRA’s current guidance says the purchaser may withhold 25% of the proceeds, or 50% on certain other property types, if no certificate has been issued. For ordinary Canadian real property sold as capital property, the working issue is usually the 25% tax/security on the estimated gain for the T2062 process.

So, in practical terms, it is not normally “50% withheld plus another 25% of the gain” in the way you described. What often happens is that the lawyer withholds part of the sale proceeds until the CRA certificate is issued, and the exact amount depends on how the file is being handled and the comfort level of the purchaser’s lawyer. This is why it is very important to start the T2062 process as soon as the sale is firm, and ideally earlier if the closing is approaching.

After the sale, you would generally file a Canadian tax return for the year of sale and report the actual capital gain. At that stage, your actual selling costs and adjusted cost base are taken into account, and any excess withholding or remittance can be refunded through the tax return process. CRA states that non-resident individuals generally file by April 30 of the following year and attach the Certificate of Compliance to the return.

On timing, CRA does issue certificates after receiving the T2062 package with all supporting documents, but delays are common if anything is missing. CRA also notes that missing documentation will delay issuance. In addition, if Underused Housing Tax filings apply and are outstanding, CRA may refuse to issue the certificate until those filing and payment obligations are addressed.

On your ACB question, there is a very important distinction between ACB for capital gains purposes and CCA/UCC for rental depreciation purposes. Capital improvements can generally increase the property’s tax cost, but for rental reporting the land portion is not depreciable, so only the building portion goes into the CCA class. If the issue is that prior rental filings treated additions incorrectly for CCA purposes, that is usually fixed by amending the prior rental reporting. If the concern is the capital gain on sale, the analysis is slightly different. That part should be reviewed carefully before the T2062 is prepared so the numbers are consistent.

Because these files are very document-sensitive, I would strongly suggest having the sale reviewed before closing, especially where there is a mortgage and limited equity. With proper planning, the required remittance can often be kept much lower than a blunt holdback based on gross proceeds.

If you would like, our office can assist with the T2062 application and the final non-resident return for the year of sale.

Best regards,