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Permanent Residency and Selling Your Business

By Jonathan MacKenzie |

Ton asked:

We are selling our Canadian Business per 1st of May 2014. We have permanent residency until May 2016.

Since September 2013, we no longer have a Canadian home address.

Are we still seen as Canadian residents? Will it affect our tax charges on the business sale, when we no longer physically live in Canada?

Jonathan MacKenzie answered:

Under the Income Tax Act, a "non-resident" is someone who "normally, customarily, or routinely live in another country and aren't considered a resident of Canada; or don't have residential ties in Canada and you live outside Canada during the tax year."

In the sale of any taxable Canadian property, a "non-resident" must comply with the rules in S. 116 of the Income Tax Act. This means that you will have to send to the Minister of Finance a notice setting out the name & address of the person who is buying the property, a description of the property sufficient to identify it, the estimated amount of the proceeds of disposition to be received by the non-resident person for the property; and the amount of the adjusted cost base to the non-resident person of the property at the time of sending the notice."

Once you have sent in your notice, you will need to send 25% of the amount by which the estimated amounts of the proceeds exceeds the adjusted cost base to the Minister of Finance or security for that amount. Once done, you will receive a certificate that you can present to the purchaser indicating that you have complied with S. 116.

DISCLAIMER: This is for informational purposes ONLY and does not constitute legal advice. No solicitor-client relationship is created by this post or by your decision to act on the information contained therein.

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