Do I file Form T2062A even if no tax is owed?
Certificate or waiver obligations of this kind are generally required on the facts rather than on the tax result, so a nil position does not remove one. Non-residents disposing of Canadian depreciable property — rental buildings included — and resource properties.
What happens if I have missed Form T2062A for several years?
Missed years are dealt with as a package rather than one at a time, because the route chosen for the first year affects the relief available for the rest. We map the years and the obligations before anything is filed.
Is Form T2062A the same as the other reports I already file?
No. The clearance application for depreciable and resource property, where recapture as well as capital gain is at stake. Satisfying a different obligation, even one covering the same accounts or entity, does nothing for this one.
I rented out my Canadian house — which clearance form applies?
Where a building has been rented and depreciation claimed against that rental income, the disposition goes down the depreciable property route rather than the plain capital property one. The reason is recapture: the depreciation taken in earlier years comes back into income on the sale, and that amount is part of what the certificate computation has to deal with. Land and building are treated differently from one another, which is why the split in the original purchase price matters again at the end. Establish which route applies before the application is drafted.
What is recapture and why does it affect the clearance?
Depreciation claimed against Canadian rental income reduced the tax paid in those years, and reduced the building's remaining cost for tax purposes at the same time. When the building is sold for more than that reduced figure, the earlier deductions are taken back into income. The recaptured amount is ordinary income rather than a capital gain, and it is computed alongside the gain in the application. A vendor thinking only about the gain usually under-estimates the amount at stake, which is what makes the holdback look larger than expected when the solicitor sets it.
I claimed depreciation for years — does that matter now?
Not a problem, but a consequence. Depreciation is a deferral rather than a permanent saving, and the sale is where the deferral ends. What matters now is that the earlier claims are reconstructed accurately: the amount claimed in each year, the class the building sat in, and the balance carried forward. Where returns were prepared by different people over the years, or some years were never filed, that reconstruction is the bulk of the work. Do it from the returns as filed, not from the accounting depreciation shown in the rental statements.
Do I need separate applications for land and building?
Land and building are different property for this purpose — one depreciable, one not — and they take different routes even though they were sold under a single agreement. That means the price has to be apportioned between them, and the apportionment has to be supportable rather than convenient. The original purchase apportionment, the assessment records and any valuation obtained for the sale all feed into it. In practice the work runs in parallel and the purchaser's solicitor sees one holdback, but the computation underneath it is really two computations.
Does the holdback cover recapture as well as the gain?
That is exactly why this route exists separately. A computation addressing only the capital gain would leave the recaptured depreciation unprotected, and the purchaser's exposure covers the vendor's tax on the disposition, not on one part of it. Expect the amount to be sized against both elements. It is also why a vendor's own estimate, made from the purchase price and the sale price alone, usually falls well short of what the solicitor ends up holding, and why that conversation is better had before the closing date than on it.
I never claimed depreciation — does this still apply?
Then there is nothing to recapture, and the disposition is simpler. But the question is answered from the returns as filed, not from memory: depreciation is sometimes claimed by a preparer as a matter of course, and a vendor who is certain they never took it is occasionally wrong. Pull the years in which the property was rented and check the position before deciding which route to take. Where the property was rented for only part of the ownership period, the change of use at each end has its own consequences to establish.
How do I report the sale of a foreign property?
On your residence-country return, as a disposition, with proceeds and cost base converted at the rates for their own dates. Separately, the country where the property sits may require its own return and may hold back tax at closing until a clearance or certificate is issued — Canada does this for a non-resident vendor, and the United States withholds on a foreign seller of US real property. Those steps have their own deadlines, often before closing. See clearance certificates on a property sale.
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.
