The Joint Committee recommends that the s. 116 certificate system be administered in a less cumbersome and aggravating manner

Recommendations of the Joint Committee to the Compliance Programs Branch on the administration of s. 116 include:

• That CRA develop a system automatically generating a comfort letter (for extending the 30-day remittance deadline until the processing of the application).
• That CRA adopt the position that, where the purchaser reasonably believes that the non-resident vendor has applied for a 116 certificate, it can continue to hold the withheld funds in trust beyond the remittance deadline until CRA has completed its review (unless otherwise notified by CRA).
• That CRA update the standard comfort letter language to provide that, at the request of the non-resident vendor, the purchaser may remit all or a portion of the amount withheld to CRA as a payment on account of the non-resident vendor’s Part I tax liability associated with the related disposition, with such remittance reducing pro tanto any potential s. 116(5) liability of the purchaser.
• That CRA adopt the position that a non-resident vendor can pay the actual amount of tax owing (rather than 25% of the gain) in order to receive a s. 116 certificate (the vendor’s payment of the actual amount of Canadian tax owing should be considered to be acceptable security respecting the disposition).
• That CRA (departing from 2019-0798861C6) confirm that the excluded disposition rule in s. 150(5)(b) will be satisfied where all Part I tax owing in respect of the TCP disposition is paid in connection with the issuance of a s. 116 certificate (so that no Canadian return filings - or filings in relation to a limited partnership - is required).
• That, where CRA has determined that the subject property is not TCP, it issue a s. 116 certificate on that basis, rather than a letter stating that it cannot issue a certificate because the property is not TCP (the certificate could be issued on the basis that no Canadian income tax is owing on the disposition) releases the purchaser from liability.

Neal Armstrong. Summary of Joint Committee, “Section 116 of the Income Tax Act,” 24 January 2025 Joint Committee submission to the Assistant Commissioner of the Compliance Programs Branch of CRA under s. 116(5).