A non-resident of Canada sells a rental property in Toronto for $900,000 that was purchased for $600,000. What are the immediate tax withholding requirements under section 116 of the Income Tax Act?
Correct Answer
B) 25% withholding on the capital gain ($75,000)
Under section 116, non-residents must obtain a clearance certificate or have 25% of the capital gain withheld. The capital gain is $300,000, so 25% withholding equals $75,000. The purchaser is responsible for remitting this amount if no clearance certificate is provided.
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