How long does a section 116 clearance certificate take?
Nobody can promise you a date, and the honest answer is that the timetable is only partly in your hands. The half you control is the application: a complete cost base, proof of what was paid for the property, the closing documents for the sale, and identification for every owner on title. An application that arrives incomplete waits until the missing evidence is supplied, and that delay is usually longer than the processing itself. The half you do not control is the queue. Because the purchaser's holdback stays in place until the certificate issues, plan the sale on the basis that the money will sit for a period you cannot schedule, and ask your solicitor to hold it in trust rather than release it on an assurance.
Why is my buyer holding back part of the sale price?
Because the purchaser, not you, is the person the CRA can pursue if the tax on your disposition goes unpaid. A purchaser buying taxable Canadian property from a non-resident is required to hold back and remit a portion of what they pay unless a certificate says otherwise, and if they release the whole price to you they take on your liability personally. That is why no purchaser's solicitor will accept your word that no tax is due, however obviously true it is. The holdback is also measured against the price rather than your gain, so it is routinely far more than the tax the sale will actually produce. The certificate is what converts it back into a figure related to the real profit.
Can I apply for the certificate before my sale closes?
Yes, and that is the version of this job worth doing. An application can be made on a proposed disposition once the terms are known, which means the certificate can be in hand on or near the closing date and the holdback never arises. The alternative is applying after the fact, when the money has already been paid and your solicitor is holding it in trust while everyone waits. The evidence is the same either way, so the only thing you gain by waiting is the wait. In practice the constraint is that the cost base has to be provable at the time you apply, so the work of finding the original purchase documents belongs before the listing rather than after the offer.
What documents prove my cost base for the application?
The statement of adjustments from when you bought, the deed or transfer, and anything showing what you actually paid, including land transfer tax and legal fees on the purchase. Capital improvements count if you can evidence them, so invoices for a new roof or an addition are worth digging out; a memory of what a renovation cost is not evidence. If the property was ever rented, the rental schedules matter as well, because depreciation claimed in earlier years changes the computation. If the property came to you by inheritance or gift, the cost base is set by reference to its value when you received it, so the valuation or the estate papers become the core of the file. Assume every figure will have to be supported by a document.
Do I still file a Canadian return after getting the certificate?
Almost always, yes, and it is the return rather than the certificate that settles the tax. The certificate is an interim step: it tells the purchaser how much to hold back and releases the rest of your money. The return for the year of disposition is where the gain is computed properly, where the costs of selling are deducted, and where any amount remitted on your behalf is applied against the tax actually due. Anything remitted above that is recovered on that return and not before. Skipping the filing is how sellers leave money with the CRA permanently while believing the certificate closed the matter. Where the property was rented, the same return also picks up the final period of rental income and any depreciation recapture.
My wife and I own the property jointly, so one certificate or two?
Two. The disposition is tested owner by owner, so each non-resident on title has their own application, their own share of the cost base and their own certificate. Couples are surprised by this because the sale is one transaction and one cheque, but the tax follows the beneficial interest, and a single application in one spouse's name leaves the other spouse's share of the price exposed to the holdback. Where the split on title does not match who actually paid for the property, that difference has to be explained rather than ignored, because the CRA will read the title. If one owner is resident in Canada and the other is not, only the non-resident's share needs the certificate, but the purchaser still has to be told which is which.
How is rental income from a foreign property taxed?
Twice over, then relieved. The country where the property sits taxes the rent — often by withholding on the gross amount, with an election available to file on the net result instead. Your residence country also taxes it, generally on net income under its own rules, and credits the foreign tax. Because the two countries compute "net" differently, the numbers rarely match without work. See the section 216 election.
Do Canada and the United States share tax information?
Yes, through more than one channel. The treaty has an exchange-of-information article that supports both routine and on-request exchange. Separately, an intergovernmental agreement has Canadian financial institutions identify US-reportable accounts and report them to the CRA, which passes them to the IRS, with the reverse flow for Canadian residents. Most other country pairs use the Common Reporting Standard for the same purpose. See FATCA reporting.
