When a non-resident sells Canadian real estate, the buyer – not the seller – is legally required to withhold a share of the sale price and send it to the Canada Revenue Agency. Get this wrong and the buyer personally owes the tax. That is why every closing involving a non-resident vendor turns on one document: the section 116 certificate of compliance.
How much is withheld
| Property type | Withholding on gross sale price |
|---|---|
| Ordinary residential property (non-depreciable) | 25% |
| Depreciable property – a rental building where CCA was claimed | 50% |
Note what that is calculated on: the gross price, not your profit. Sell a $600,000 condo and $150,000 is held back, even if you made $40,000 on it.
The 25% vs 35% question, and where it actually stands
Draft legislation released June 10, 2024 would have raised the rate from 25% to 35% for dispositions on or after January 1, 2025. It was part of the package that moved the capital gains inclusion rate to two-thirds.
That inclusion rate increase was cancelled on March 21, 2025. The withholding increase was never separately enacted, and the CRA has not issued formal guidance confirming whether 35% applies, is deferred, or is abandoned along with the rest of the package.
What this means in practice: 25% remains the operative rate, and it is what buyers’ lawyers are withholding. Because the position is unresolved rather than settled, confirm the rate with the CRA or your tax advisor for your specific closing date rather than relying on any published figure – including this one. Any article that states 35% as settled law is reporting a draft as though it were enacted.
Reducing the holdback: the clearance certificate
You do not have to lose a quarter of the sale price. Apply for a certificate of compliance and the withholding drops to roughly 25% of your gain instead of the gross price.
On that $600,000 condo with a $100,000 profit, the difference is $150,000 held back versus about $25,000. The rest closes into your hands.
The forms: apply on T2062 (and T2062A if depreciable property is involved). If the CRA approves, it issues T2064 where the tax has been paid or secured before closing, or T2068 where it is settled afterwards. Those are the certificates your lawyer needs to see.
The deadline: you must notify the CRA within 10 days after closing. Late notification costs $25 per day, minimum $100, to a maximum of $2,500. Do not wait for closing – apply as soon as the agreement is firm.
What you will need:
- The agreement of purchase and sale, and ideally the original purchase agreement
- Proof of your adjusted cost base – the purchase price plus documented capital improvements
- Rental income history, if you rented the property out
- A Canadian tax number. No SIN means filing form T1261 for an Individual Tax Number first, which adds weeks on its own
How long it takes: the CRA aims for 6 to 8 weeks. Real-world waits run 8 to 12 weeks, and backlogs have pushed some applications past six months. Plan the closing around this, not the other way around.
If the certificate has not arrived by closing, the buyer’s lawyer withholds the full 25% and holds it in trust. When the certificate issues, the excess is released to you and the balance goes to the CRA. Nothing is lost – but the money is frozen for months.
Why the buyer cares more than you do
If no certificate is produced and no funds are withheld, the CRA can assess the buyer for the seller’s tax. In Mao v. Liu (British Columbia, 2017), a buyer was left with a roughly $600,000 tax bill because the vendor turned out to be a non-resident and nothing had been held back.
This is why buyers demand a statutory declaration of residency at closing, and why a seller who declares residency falsely creates a problem that follows both parties. Buyers’ lawyers do not treat this as negotiable, and they are right not to.
After closing: the return and the refund
Selling triggers a Canadian tax return for that year, due April 30 of the following year. You report the disposition, calculate the real gain, and reconcile against what was withheld. In most cases the withholding exceeds the tax and the CRA refunds the difference.
Principal residence exemption: years in which you were a Canadian resident and the property was your home can shelter part of the gain. Years you were non-resident generally cannot. Live in a house for three years, move abroad, sell two years later, and only the resident years count toward the exemption.
Two other filings that catch non-resident owners
Rental income. If you rented the property out, Canada requires 25% withholding on gross rent, remitted monthly by your tenant or property manager. You can elect to be taxed on net income instead by filing under section 216 – usually much better, since expenses become deductible. This matters at sale time: the CRA will not issue your clearance certificate while rental filings are outstanding. Catch up first, through a voluntary disclosure if necessary.
Underused Housing Tax – now repealed. The UHT was a 1% annual tax on vacant or underused residential property, with an annual return required even where no tax was owed. Bill C-15 received Royal Assent on March 26, 2026 and eliminated the UHT for the 2025 calendar year and all years after. There is no longer a UHT return to file.
Obligations for 2022, 2023 and 2024 survive the repeal, including penalties and interest for returns never filed. Non-resident owners who ignored the UHT in those years still have exposure, and it is worth clearing up before a sale rather than during one.
Less obvious triggers
Section 116 is not limited to selling a house. It also applies when a non-resident:
- Sells an assignment of a pre-construction purchase agreement – withholding applies to the amount paid for the assignment
- Sells shares of a corporation whose value comes principally from Canadian real property
- Transfers property to a family member, since a gift is still a disposition at fair market value
Frequently asked questions
Do non-residents of Canada pay capital gains tax? Yes, on the disposition of taxable Canadian property including real estate. The withholding at closing is a deposit against that tax, not the tax itself – you reconcile it on a Canadian return and most sellers get part of it back.
What is non-resident withholding tax in Canada? Under section 116 of the Income Tax Act, the buyer must withhold and remit a share of the gross sale price – 25% for ordinary residential property, 50% for depreciable property – unless a certificate of compliance is produced.
How do I get a certificate of compliance? File form T2062 with the CRA, with the purchase and sale agreements, proof of your original cost and improvements, and a Canadian tax number. If approved, the CRA issues form T2064 or T2068, and the withholding drops to roughly 25% of your gain rather than the whole price.
What is the difference between T2062 and T2062A? T2062 covers the disposition of taxable Canadian property generally. T2062A is used where depreciable property is involved – typically a rental building on which capital cost allowance was claimed – and deals with the recapture side of the calculation. Many rental sales need both.
What is the penalty for filing a T2062 late? Ten days after closing is the hard deadline, and the penalty runs daily from there. Because the clock starts at closing rather than at approval, the application should already be filed by the time you complete.
How long does the clearance certificate take? The CRA aims for six to eight weeks. In practice eight to twelve weeks is normal and backlogs have pushed some applications past six months. Apply as soon as the deal is firm, not after closing.
Can I avoid the withholding? No. You can reduce it to a percentage of your gain with a certificate of compliance, and that is the only lever. If the certificate has not arrived by closing, the full amount is held in trust and released once it does.
Does a Canadian citizen living abroad have to deal with this? Yes. Citizenship is irrelevant – section 116 turns on residency for tax purposes.
Closing a non-resident sale in Ontario
Zinati Kay has closed real estate transactions across Ontario for more than 25 years, including non-resident sales where the holdback, the trust arrangements and the certificate timing all have to line up. Remote signing is available anywhere in the world.
Non-resident sales fall outside our standard fixed-fee package – call for a quote and we will map out the timeline before you commit to a closing date.
416-321-8766 · john@zinatikay.com
General information about Canadian tax law as of August 2026. Not tax advice – confirm current withholding rates and your own position with a Canadian tax advisor.