What happens if I file Form T2062A after the sale has closed?
Two different defaults get confused here. The clearance application is a notification with its own due date measured from the disposition, and being late with it is charged by reference to the filing and the length of the delay, not by reference to tax owing. That is why a disposition with no tax to pay can still be expensive. Separately, the disposition has to be reported on a Canadian income tax return for the year, and if that return is late with a balance owing the return late-filing penalty applies: for the 2025 tax year, 5 per cent of the balance owing plus 1 per cent for each full month the return is late, to a maximum of twelve months.
Does the penalty double if I was late on a Canadian return before?
Not doubled, and not triggered by repetition alone. On the return late-filing penalty, the higher rate applies only where the CRA issued a demand to file and charged a late-filing penalty in any of the three preceding tax years. Both conditions, not either. Where they are met, the penalty for the 2025 tax year is 10 per cent of the balance owing plus 2 per cent for each full month the return is late, to a maximum of twenty months. The flat part doubles and the monthly part doubles, but the cap runs to twenty months rather than twelve, which is not a doubling of anything. The penalty does not compound. Interest compounds daily on the unpaid balance.
The recapture makes my balance owing larger. Does that increase the penalty?
Yes, because the return late-filing penalty is a percentage of the balance owing rather than a flat charge. On a sale of depreciable property that balance can be larger than a seller expects, since depreciation claimed against Canadian rental income in earlier years is recaptured on the sale and the recapture is income in the year of disposition. A seller who budgeted for tax on the capital gain alone finds the balance has grown before a single month of lateness is counted. For the 2025 tax year the base penalty is 5 per cent of that balance plus 1 per cent per full month, to twelve months, and interest runs separately and compounds daily.
I sold two years ago and filed nothing. What do I do now?
Work backwards from the disposition rather than starting with the form. There are usually three threads: the notification that fell due on the disposition, the Canadian income tax return for the year of the sale, and whatever withholding the purchaser did or did not remit. Each is dealt with on its own footing, and the order matters, because the return figures depend on what the clearance computation settles. Leaving it longer rarely helps. For the 2025 tax year the return penalty accrues at 1 per cent of the balance owing for each full month, on top of the initial 5 per cent, until it reaches twelve months, and interest compounds daily on what is unpaid.
Can the CRA cancel the penalty if the delay was not my fault?
There is a relief route, and it turns on the facts and the record rather than on how reasonable the delay feels. What tends to carry weight is contemporaneous evidence: correspondence showing the application was in hand, a dated request for a document the seller could not obtain, an illness or a death with dates attached. What tends not to carry weight is a general account of confusion about which form applied. Two practical points. Relief is asked for after the filings are in, not instead of them, so bringing the notification and the return up to date comes first. And penalty and interest are considered separately, so relief on one does not follow from relief on the other.
Does a nil gain mean no penalty for filing the clearance form late?
No, and this is the trap on depreciable property. The notification obligation comes from the disposition itself, so the exposure attaching to a late one is measured by the default rather than by the tax result. A seller who works out that the building sold for roughly what the records show, and concludes nothing is due, has answered the wrong question. Two things then go wrong at once. The late notification stands on its own. And the nil conclusion is often not nil, because depreciation claimed in earlier Canadian rental years is recaptured on the sale and is income whether or not the building appreciated. Compute the recapture first, then decide what the position is.
What happens when a non-resident sells Canadian property?
The buyer or their solicitor is obliged to withhold on the purchase price unless you obtain a clearance certificate, so the practical work happens before closing rather than after. The certificate application reports the disposition and the gain and fixes the amount the authority requires to be held. Apply late and the withholding is computed on the gross price, tying up cash until a return recovers it. See the section 116 clearance certificate.
Can I set up a trust that works in two countries?
You can, but the two systems classify and tax trusts differently enough that a structure which is efficient in one is often a reporting problem in the other — a Canadian family trust with a US beneficiary, or a US revocable trust holding Canadian property, are the classic pairs. Canada's twenty-one-year deemed disposition, the US grantor rules and each country's reporting have to be read together, before drafting rather than after. See cross-border wills and trusts.
