31 March 1993 Income Tax Severed Letter 3M05210-28 - APFF 1992: Question 28—Section 116 certificate

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                     TRANSLATION FROM FRENCH

ASSOCIATION DE PLANIFICATION FISCALE ET FINANCIFERE

                   REVENUE CANADA ROUND TABLE

1992 CONFERENCEASSOCIATION DE PLANIFICATION FISCALE ET FINANCIFERE
                   REVENUE CANADA ROUND TABLE
                          October 1992

              IV.  AUDITS AND ADMINISTRATION

Question 28

Section 116 certificate

Section 116 of the Act provides for the obtaining of a certificate when a non-resident of Canada disposes of taxable Canadian property. Section 116 of the Act gives no leeway when the property sold by the non-resident might be eligible for the principal residence exemption, the capital gains exemption or an exemption under a tax convention.

In such situations, does the Department of National Revenue agree, on an administrative basis, to take these various exemptions into account when it issues a certificate under section 116 of the Act?

Department of National Revenue response

In order for us to deliver a certificate of compliance to a vendor, the latter must provide us with a payment or acceptable guaranty to cover the tax that may be required in respect of any gain realized at the time of the disposition of the property. Information Circular 72-17R4 describes certain administrative policies in the Department in this connection.

In paragraph 68 of the Circular, there is a discussion of the disposition of a principal residence by a non-resident owner. Where a part or all of the gain from the disposition of a taxpayer's residence is exempted from tax under paragraph 40(2)(b) or (c), the Department accepts, as security under paragraph 116(2)(b), a letter setting out the calculations for the anticipated capital gain arising from the disposition (in taking into account any possible reduction under paragraph 40(2)(b) or (c). This letter must be attached to Form T2062. The taxpayer must provide a payment or security for the taxable part of the gain.

Paragraph 24 of the Circular states that the Department allows sellers to apply for an exemption under a particular tax convention at the time they file a notice of disposition. The sellers must then refer to the applicable section or paragraph of the particular convention between Canada and their country of residence.

The capital gains deduction may be claimed by an individual residing in Canada throughout a given tax year. The Act provides a broad definition of residence for the purposes of that deduction, in the case of an individual who is residing in Canada on any day of the year in question and who resides there, either throughout the preceding taxation year or the following taxation year. Most non-residents cannot, therefore, claim such a deduction.