Section 116 of Income Tax Act requires a non-resident vendor to notify CRA about disposition of property (described below) before the sale and obtain a certificate of compliance after payment of any tax on the gain the vendor may realise upon disposition of that property or providing a sufficient security to cover that tax. Most vendors will not have that amount ready to be disbursed before the sale or they may not inform the CRA ahead of time about the disposition, which is why there is an option to withhold and remit 25%/50% of the sale price to CRA, failing which the buyer would become liable for any tax owing on such disposition. Often, as a part of closing the transaction, documents are exchanged declaring the residency status of the seller and is considered sufficient proof of inquiry and discharge of buyer’s liability towards this tax. This presumption is overturned when buyer has actual/imputable knowledge about vendor’s non-resident status. Where you, as a buyer, become aware of the non-resident status of the vendor, it is essential to bring this to your lawyer’s attention, failing which, you may become liable for the taxes owed by the vendor. That said, not all buyers, need worry about this. Just those who are buying property considered “Taxable Canadian Property” under Canada’s Income Tax Act. “Taxable Canadian Property” is defined in Section 248 of the Act and includes: (a) real or immovable property situated in Canada; (b) property used or held in, or eligible capital property in respect of, a business carried on in Canada; (c) designated insurance property of an insurer; (d) a share of the capital stock of a corporation (other than a mutual fund corporation) that is not listed on a designated stock exchange, if, at any time in the last 60 months more than 50% of the fair market value of the share was derived directly or indirectly from one or any combination of, (i) real or immovable property situated in Canada; (ii) Canadian resource properties; (iii) timber resource properties, and; (iv) options in respect of, or interests in, or for civil law, rights in a property described   in i), ii) or iii) above, whether or not the property exists. (e) an interest in a partnership if, at any time in the last 60 months, more than 50% of the fair market value of the interest, was derived directly or indirectly from one or any combination of the properties listed in (d)(i) to (d)(iv) above; (f) an interest in a trust (other than a unit of a mutual fund trust or an income interest in a trust resident in Canada) if, at any time in the last 60 months, more than 50% of the fair market value of the interest was derived directly or indirectly from one or any combination of the properties listed in (d)(i) to (d)(iv) above; (g) a share of the capital stock of a corporation that is listed on a designated stock exchange if at any time in the last 60 months, (i) 25% or more of the issued shares of any class of capital stock of the corporation were owned or belonged to one or a combination of, (A) the taxpayer; and (B) persons with whom the taxpayer did not deal with at arm’s length and (ii) more than 50% of the fair market value of the share was derived directly or indirectly from one or any combination of properties described in (d)(i) to (d)(iv) above. This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please contact us. Each case is unique and we can provide you with advice tailored to your specific situation and needs.