Canadian Tax Adviser
March 2010

New Procedures to Expedite Section 116 Certificates

Jeff Howald
Canadian Tax, Waterloo

The Canada Revenue Agency (CRA) has set up a Regional Intake Centre to handle requests for section 116 clearance certificates from Toronto, Thunder Bay, Kitchener-Waterloo, and London, Ontario.

Under this pilot project, which commenced on January 18, 2009, the CRA's Kitchener-Waterloo Tax Services Office (TSO) will process all Section 116 clearance certificates for these regions in an effort to reduce delays.

Background
Generally, Section 116 applies to dispositions of "taxable Canadian property" by a non-resident. Generally, section 116 requires a 25 percent withholding tax against the estimated gain realized from the sale of the property. This withholding tax amount can be reduced if the vendor receives a clearance certificate from the CRA stating that the withholding tax applies to a lower amount, the withholding tax rate is lower due to a tax treaty with the country of residence of the vendor, or the entire disposition is exempt from withholding tax.

Regional Intake Centre
Registered mail should be used when filing Section 116 clearance certificate requests to Ontario's Regional Intake Centre, since the Centre's new mailing address is a post office box, which couriers will not deliver to.

The CRA notes that delays in processing these forms are usually due to:

• Non-residents that do not have Individual Tax Numbers (Form T1261) 
• Proper supporting documentation is not included with the request. However, the CRA notes that it would prefer the forms are filed on time rather than waiting for the proper supporting documentation
• Covering letters that use incorrect terminology such as "Clearance Certificate". The CRA notes that covering letters should refer to "Certificate of Compliance" or "Section 116" requests to ensure the request is directed to the appropriate section.

The CRA notes that local TSO contacts for Section 116 will not change.

All section 116 clearance certificates for Toronto, Thunder Bay, Kitchener-Waterloo, and London should be mailed to the Regional Intake Centre.

For more information, contact your KPMG adviser.

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