Canada non-resident capital gains: Section 116 clearance certificate, Part XIII withholding, taxable Canadian property (TCP), notional assessment. Trigger on: "non-resident selling Canadian property", "Section 116 Canada", "clearance certificate CRA", "TCP taxable Canadian property", "withholding on sale Canada", "non-resident selling Canadian shares", "Part XIII withholding Canada", "NR4 Canada".
Source-cited draft.Written from sources but not reviewed by a licensed practitioner, so it may be incomplete or wrong. General reference only; don't file or take a position on it without professional review.
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Every figure is drawn from this Tax Guide and cited to its source.
Taxation of non-residents on TCP
Non-residents of Canada are taxed on capital gains from Taxable Canadian Property (TCP). Gains from non-TCP assets: no Canadian tax.
Taxable Canadian Property (TCP)
| Asset | TCP? | |---|---| | Canadian real property | **Always TCP** | | Property used in a Canadian business (inventory, equipment) | TCP | | Shares in a **private corporation** where > 50% of FMV derives from Canadian real property in any of the preceding 60 months | TCP | | Shares in a **public corporation** listed on a designated exchange | **Not TCP** (general rule) | | Shares in a Canadian-controlled private corporation (CCPC) — operating business | TCP if the 50% real property test is met; otherwise not TCP | | Options to acquire TCP | TCP | | Partnership interests where > 50% of FMV is Canadian real property | TCP |
Notify CRA deadline
Within 10 days of the sale (or before the sale if withholding obligation applies)ITA §116
Buyer withholding rate on gross proceeds if no clearance certificate
25%ITA §116
Filing requirement for non-residents disposing of TCP
Non-residents who dispose of TCP must file a Canadian non-resident tax return (T1 or T2 as applicable) for the year of disposition. A non-resident individual files Form T1 — Income Tax and Benefit Return noting non-resident status.
Part XIII withholding on dividends to non-residents
25%ITA §212–218 (Part XIII)
Rendered from the canonical facts model. General reference only — confirm with a qualified professional before acting.
Taxable Canadian Property (TCP)
| Asset | TCP? |
|---|---|
| Canadian real property | Always TCP |
| Property used in a Canadian business (inventory, equipment) | TCP |
| Shares in a private corporation where > 50% of FMV derives from Canadian real property in any of the preceding 60 months | TCP |
| Shares in a public corporation listed on a designated exchange | Not TCP (general rule) |
| Shares in a Canadian-controlled private corporation (CCPC) — operating business | TCP if the 50% real property test is met; otherwise not TCP |
| Options to acquire TCP | TCP |
| Partnership interests where > 50% of FMV is Canadian real property | TCP |
When a non-resident disposes of TCP, they must notify the CRA and obtain a clearance certificate under ITA §116:
The withholding is on gross proceeds — not the gain. This can be extremely punishing on low-gain transactions.
Non-residents pay Canadian income tax on TCP gains at the same rates as residents, applied to the included portion of the gain (50% inclusion rate — see ca-capital-gains).
Combined federal + provincial top rates on the included portion: approximately 26%–27% (federal) + varying provincial rates.
Working paper only. The TCP classification for shares requires analysis of the corporation's assets. A §116 clearance certificate must be obtained BEFORE settlement or the buyer faces withholding liability. Engage a qualified Canadian tax adviser.
Other Canada computations in the OpenAccountants Tax Library.
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