Non-Resident Tax Filing Requirements in Canada | Section 116 Clearance
Non-Resident Tax Filing Requirements in Canada | Section 116 Clearance
Are you a non-resident of Canada who owns Canadian property or receives Canadian income? Understanding your tax obligations is critical to avoid penalties, interest charges, and potential disputes with the Canada Revenue Agency (CRA). At Insight Accounting CPA, we specialize in helping international clients navigate the complex web of Canadian non-resident tax requirements.
Canada has specific tax filing obligations for non-residents that differ significantly from those of Canadian residents. Whether you’re selling real estate in Toronto, receiving rental income from a Mississauga investment property, or earning dividends from a Canadian corporation, understanding Section 116 clearance certificates and withholding tax requirements is essential for compliance.
What Makes You a Non-Resident of Canada?
The CRA determines residency status based on several factors, not just citizenship or the amount of time spent in Canada. Key indicators include:
- Primary residential ties outside Canada
- Secondary residential ties, including personal property, memberships, and economic connections
- Significant residential ties to another country
- Habitual abode and permanent home location
If you maintain significant residential ties in Canada while living elsewhere, you may be considered a deemed resident or factual resident for tax purposes. Contact our CPA team for residency determination assistance.
Part I Non-Resident Tax Filing: The Basics
Under Section 2(3) of the Income Tax Act, non-residents must file a Canadian tax return if they earn income from employment performed in Canada, carry on business in Canada, or dispose of taxable Canadian property.
Section 116 Clearance Certificate
When a non-resident sells taxable Canadian property, the purchaser must withhold 25% of gross proceeds unless a Section 116 clearance certificate is obtained from the CRA. Non-residents must file Form T2062 within 10 days after the disposition. Our tax professionals can assist with this process.
Tax Planning Strategies
Strategic timing of property dispositions, treaty benefits from Canada’s 90+ tax treaties, and the Section 216 election for rental income can optimize tax outcomes for non-residents.
Contact Insight Accounting CPA at (905) 270-1873 for expert non-resident tax guidance or schedule a consultation.
Frequently Asked Questions
What is a Section 116 clearance certificate?
A certificate issued by CRA confirming that a non-resident seller has either paid the required tax or made appropriate arrangements, allowing the buyer to release withheld funds.
How long does it take to get a Section 116 clearance?
CRA typically processes Section 116 applications within 4-6 months, though complex cases may take longer. Early application is essential.
Do I need to file a Canadian tax return as a non-resident?
Yes, if you earn Canadian employment income, carry on business in Canada, or dispose of taxable Canadian property. Our accounting team can ensure compliance.