Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Disposition by non-resident person of certain property

• 116 (1) If a non-resident person proposes to dispose of any taxable Canadian property (other than property described in subsection (5.2) and excluded property) the non-resident person may, at any time before the disposition, send to the Minister a notice setting out

  • (a) the name and address of the person to whom he proposes to dispose of the property (in this section referred to as the “proposed purchaser”);

  • (b) a description of the property sufficient to identify it;

  • (c) the estimated amount of the proceeds of disposition to be received by the non-resident person for the property; and

  • (d) the amount of the adjusted cost base to the non-resident person of the property at the time of the sending of the notice.

• Marginal note:Certificate in respect of proposed disposition

  (2) Where a non-resident person who has sent to the Minister a notice under subsection 116(1) in respect of a proposed disposition of any property has

  • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, 25% of the amount, if any, by which the estimated amount set out in the notice in accordance with paragraph 116(1)(c) exceeds the amount set out in the notice in accordance with paragraph 116(1)(d), or

  • (b) furnished the Minister with security acceptable to the Minister in respect of the proposed disposition of the property,

  the Minister shall forthwith issue to the non-resident person and the proposed purchaser a certificate in prescribed form in respect of the proposed disposition, fixing therein an amount (in this section referred to as the “certificate limit”) equal to the estimated amount set out in the notice in accordance with paragraph 116(1)(c).

• Marginal note:Notice to Minister

  (3) Every non-resident person who in a taxation year disposes of any taxable Canadian property of that person (other than property described in subsection 116(5.2) and excluded property) shall, not later than 10 days after the disposition, send to the Minister, by registered mail, a notice setting out

  • (a) the name and address of the person to whom the non-resident person disposed of the property (in this section referred to as the “purchaser”),

  • (b) a description of the property sufficient to identify it, and

  • (c) a statement of the proceeds of disposition of the property and the amount of its adjusted cost base to the non-resident person immediately before the disposition,

  unless the non-resident person has, at any time before the disposition, sent to the Minister a notice under subsection 116(1) in respect of any proposed disposition of that property and

  • (d) the purchaser was the proposed purchaser referred to in that notice,

  • (e) the estimated amount set out in that notice in accordance with paragraph 116(1)(c) is equal to or greater than the proceeds of disposition of the property, and

  • (f) the amount set out in that notice in accordance with paragraph 116(1)(d) does not exceed the adjusted cost base to the non-resident person of the property immediately before the disposition.

• Marginal note:Certificate in respect of property disposed of

  (4) Where a non-resident person who has sent to the Minister a notice under subsection 116(3) in respect of a disposition of any property has

  • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, 25% of the amount, if any, by which the proceeds of disposition of the property exceed the adjusted cost base to the non-resident person of the property immediately before the disposition, or

  • (b) furnished the Minister with security acceptable to the Minister in respect of the disposition of the property,

  the Minister shall forthwith issue to the non-resident person and the purchaser a certificate in prescribed form in respect of the disposition.

• Marginal note:Liability of purchaser

  (5) Where in a taxation year a purchaser has acquired from a non-resident person any taxable Canadian property (other than depreciable property or excluded property) of the non-resident person, the purchaser, unless

  • (a) after reasonable inquiry the purchaser had no reason to believe that the non-resident person was not resident in Canada,

  • (a.1) subsection (5.01) applies to the acquisition, or

  • (b) a certificate under subsection 116(4) has been issued to the purchaser by the Minister in respect of the property,

  is liable to pay, and shall remit to the Receiver General within 30 days after the end of the month in which the purchaser acquired the property, as tax under this Part for the year on behalf of the non-resident person, 25% of the amount, if any, by which

  • (c) the cost to the purchaser of the property so acquired

  exceeds

  • (d) the certificate limit fixed by the certificate, if any, issued under subsection 116(2) in respect of the disposition of the property by the non-resident person to the purchaser,

  and is entitled to deduct or withhold from any amount paid or credited by the purchaser to the non-resident person or otherwise recover from the non-resident person any amount paid by the purchaser as such a tax.

• Marginal note:Treaty-protected property

  (5.01) This subsection applies to the acquisition of a property by a person (referred to in this subsection as the “purchaser”) from a non-resident person if

  • (a) the purchaser concludes after reasonable inquiry that the non-resident person is, under a tax treaty that Canada has with a particular country, resident in the particular country;

  • (b) the property would be treaty-protected property of the non-resident person if the non-resident person were, under the tax treaty referred to in paragraph (a), resident in the particular country; and

  • (c) the purchaser provides notice under subsection (5.02) in respect of the acquisition.

• Marginal note:Notice by purchaser in respect of an acquisition of property

  (5.02) A person (referred to in this subsection as the “purchaser”) who acquires property from a non-resident person provides notice under this subsection in respect of the acquisition if the purchaser sends to the Minister, on or before the day that is 30 days after the date of the acquisition, a notice setting out

  • (a) the date of the acquisition;

  • (b) the name and address of the non-resident person;

  • (c) a description of the property sufficient to identify it;

  • (d) the amount paid or payable, as the case may be, by the purchaser for the property; and

  • (e) the name of the country with which Canada has concluded a tax treaty under which the property is a treaty-protected property for the purposes of subsection (5.01) or (6.1), as the case may be.

• Marginal note:Gifts, etc.

  (5.1) If a non-resident person has disposed of or proposes to dispose of a life insurance policy in Canada, a Canadian resource property or a taxable Canadian property other than

  • (a) excluded property, or

  • (b) property that has been transferred or distributed on or after the non-resident person’s death and as a consequence thereof

  to any person by way of gift inter vivos or to a person with whom the non-resident person was not dealing at arm’s length for no proceeds of disposition or for proceeds of disposition less than the fair market value of the property at the time the non-resident person so disposed of it or proposes to dispose of it, as the case may be, the following rules apply:

  • (c) the reference in paragraph 116(1)(c) to “the proceeds of disposition to be received by the non-resident person for the property” shall be read as a reference to “the fair market value of the property at the time the non-resident person proposes to dispose of it”,

  • (d) the references in subsections 116(3) and (4) to “the proceeds of disposition of the property” shall be read as references to “the fair market value of the property immediately before the disposition”,

  • (e) the references in subsection 116(5) to “the cost to the purchaser of the property so acquired” shall be read as references to “the fair market value of the property at the time it was so acquired”, and

  • (f) the reference in subsection 116(5.3) to “the amount payable by the taxpayer for the property so acquired” shall be read as a reference to “the fair market value of the property at the time it was so acquired”.

• Marginal note:Certificates for dispositions

  (5.2) If a non-resident person has, in respect of a disposition, or a proposed disposition, in a taxation year to a taxpayer of property (other than excluded property) that is a life insurance policy in Canada, a Canadian resource property, a property (other than capital property) that is real property, or an immovable, situated in Canada, a timber resource property, depreciable property that is a taxable Canadian property or any interest in, or for civil law any right in, or any option in respect of, a property to which this subsection applies (whether or not that property exists),

  • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, such amount as is acceptable to the Minister in respect of the disposition or proposed disposition of the property, or

  • (b) furnished the Minister with security acceptable to the Minister in respect of the disposition or proposed disposition of the property,

  the Minister shall forthwith issue to the non-resident person and to the taxpayer a certificate in prescribed form in respect of the disposition or proposed disposition fixing therein an amount equal to the proceeds of disposition, proposed proceeds of disposition or such other amount as is reasonable in the circumstances.

• Marginal note:Liability of purchaser in certain cases

  (5.3) Where in a taxation year a taxpayer has acquired from a non-resident person property referred to in subsection 116(5.2),

  • (a) the taxpayer, unless subsection (5.01) applies to the acquisition or unless after reasonable inquiry the taxpayer had no reason to believe that the non-resident person was not resident in Canada, is liable to pay, as tax under this Part for the year on behalf of the non-resident person, 50% of the amount, if any, by which

    • (i) the amount payable by the taxpayer for the property so acquired

    exceeds

    • (ii) the amount fixed in the certificate, if any, issued under subsection 116(5.2) in respect of the disposition of the property by the non-resident person to the taxpayer

    and is entitled to deduct or withhold from any amount paid or credited by the taxpayer to the non-resident person or to otherwise recover from the non-resident person any amount paid by the taxpayer as such a tax; and

  • (b) the taxpayer shall, within 30 days after the end of the month in which the taxpayer acquired the property, remit to the Receiver General the tax for which the taxpayer is liable under paragraph 116(5.3)(a).

• Marginal note:Presumption

  (5.4) Where there has been a disposition by a non-resident of a life insurance policy in Canada by virtue of subsection 148(2) or any of paragraphs (a) to (c) and (e) of the definition disposition in subsection 148(9), the insurer under the policy shall, for the purposes of subsections 116(5.2) and (5.3) be deemed to be the taxpayer who acquired the property for an amount equal to the proceeds of disposition as determined under section 148.

• Definition of excluded property

  (6) For the purposes of this section, excluded property of a non-resident person means

  • (a) a property that is a taxable Canadian property solely because a provision of this Act deems it to be a taxable Canadian property;

  • (a.1) a property (other than real or immovable property situated in Canada, a Canadian resource property or a timber resource property) that is described in an inventory of a business carried on in Canada by the person;

  • (b) a security that is

    • (i) listed on a recognized stock exchange, and

    • (ii) either

      • (A) a share of the capital stock of a corporation, or

      • (B) SIFT wind-up entity equity;

  • (c) a unit of a mutual fund trust;

  • (d) a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation;

  • (e) property of a non-resident insurer that

    • (i) is licensed or otherwise authorized under the laws of Canada or a province to carry on an insurance business in Canada, and

    • (ii) carries on an insurance business, within the meaning of subsection 138(1) of the Act, in Canada;

  • (f) property of an authorized foreign bank that carries on a Canadian banking business;

  • (g) an option in respect of property referred to in any of paragraphs (a) to (f) whether or not such property is in existence;

  • (h) an interest, or for civil law a right, in property referred to in any of paragraphs (a) to (g); and

  • (i) a property that is, at the time of its disposition, a treaty-exempt property of the person.

• Marginal note:Treaty-exempt property

  (6.1) For the purpose of subsection (6), a property is a treaty-exempt property of a non-resident person, at the time of the non-resident person’s disposition of the property to another person (referred to in this subsection as the “purchaser”), if

  • (a) it is, at that time, a treaty-protected property of the non-resident person; and

  • (b) where the purchaser and the non-resident person are related at that time, the purchaser provides notice under subsection (5.02) in respect of the disposition.

• Marginal note:Application of s. 138(12)

  (7) The definitions in subsection 138(12) apply to this section.

• Marginal note:Exception — underused housing tax

  (8) If, in the absence of this subsection, the Minister would be required to issue a certificate under subsection (2), (4) or (5.2) in respect of a disposition, or a proposed disposition, of property that is residential property, as defined in section 2 of the Underused Housing Tax Act, the Minister may decline to issue the certificate if

  • (a) the Minister is not satisfied that all returns that the non-resident person is required to file under section 7 of that Act in respect of the property have been filed;

  • (b) the Minister is not satisfied that all taxes and other amounts payable under that Act by the non-resident person have been paid; or

  • (c) the following conditions are met:

    • (i) the Minister has reasonable grounds to believe that, for the calendar year immediately preceding the calendar year in which the property is or is expected to be disposed of, the non-resident person will be required to file a return under section 7 of that Act in respect of the property or will become liable to pay an amount of tax under subsection 6(3) of that Act in respect of the property, and

    • (ii) the return has not been filed or the amount of tax has not been paid.