Failure to comply penalty - Non-resident vendor notification on the disposition of taxable Canadian property

Notification by a non-resident vendor

Subsection 116(3) of the Income Tax Act (the Act) requires non-resident vendors to notify the Canada Revenue Agency (CRA) within ten days of disposing of taxable Canadian property.

Failure to provide notification

Non-resident vendors who fail to notify CRA within the ten-day period will be liable to a penalty under subsection 162(7) of the Act. This penalty is $25 a day for each day the notification is late, with a minimum of $100 and a maximum of $2,500.

A tax services office will not issue a certificate of compliance until it receives payment or security acceptable to the Minister of National Revenue for the taxes payable pursuant to subsection 116(4) on the gain.

Exceptions

Non-resident vendors of taxable Canadian property are not subject to the ten-day timeframe for the following transactions:

  • all proposed dispositions [subsection 116(1)]
  • dispositions pursuant to subsection 116(5.2), as reported on forms T2062A and T2062B:
    • depreciable property;
    • life insurance policies;
    • Canadian resource property;
    • timber resource property; and
    • property (other than capital property) that is real property situated in Canada (inventory of land), or any interest in, or option in respect of a property to which this subsection applies.

Application to waive or cancel the penalty

Under subsection 220(3.1) of the Act, non-resident vendors can apply to the Minister to waive or cancel the penalty if the notification was late due to circumstances beyond their control. In their application, they have to outline the reason(s) they did not notify the CRA within ten days of disposing of the property, as required by subsection 116(3). They also have to explain how their situation falls under the taxpayer relief provisions for the cancellation of penalties and interest.

Non-resident vendors must send their taxpayer relief provision requests to the Tax Services Office that issued the certificate of compliance.

References

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