Taxable Canadian property

The term matters when the seller of a Canadian business or its property is not resident in Canada. In IC72-17R6 the CRA says that, for dispositions after March 4, 2010, taxable Canadian property is described in subsection 248(1), and it gives a list that it says is not complete. The list includes real or immovable property situated in Canada, property used or held in a business carried on in Canada, and certain shares and partnership interests, depending on what their value was derived from. Subsection 2(3) of the Act imposes income tax on a non-resident who disposed of taxable Canadian property.

Excluded property

Some taxable Canadian property is excluded property under subsection 116(6) and is outside the requirements of section 116. The CRA’s list includes property that is taxable Canadian property solely because a provision of the Act deems it so, inventory of a business carried on in Canada (other than real property, resource property and timber resource property), and shares listed on a recognized stock exchange. Whether a share or interest qualifies turns on tests in the Act, which a tax adviser reads against the facts.

What to ask

• What the seller holds: shares, assets, real property or a partnership interest
• Whether an exclusion in subsection 116(6) applies, and who confirmed it
• Whether a section 116 certificate is needed before closing