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Get My Free Estimate →When a non-resident of Canada sells Canadian real property, section 116 of the Income Tax Act puts a withholding obligation on the transaction. For ordinary residential property held as capital property the rate is 25 per cent, not 50 — the 50 per cent in s. 116(5.2) reaches inventory and depreciable property. Two different bases apply: the seller pays 25 per cent of the gain to obtain a certificate of compliance under s. 116(2), while a buyer who gets no certificate is liable under s. 116(5) for 25 per cent of the full purchase price. The buyer escapes only where, “after reasonable inquiry”, they had no reason to believe the seller was a non-resident — hence the statutory declaration of residency. The seller must notify CRA within 10 days of the disposition or face $25 a day, minimum $100, maximum $2,500. The withholding is a payment on account, not the tax: file the Canadian return for the year of disposition and the excess is refunded. CRA publishes no service standard for how long a certificate takes.
Everything written for non-residents and Ontario real estate is about buying. Non-Resident Speculation Tax, mortgage qualification, which banks lend. Almost nothing is written about the other end, where a non-resident sells and discovers that a quarter of the sale price does not arrive on closing day, and may not arrive for the better part of a year.
This page is about section 116 of the Income Tax Act: what actually gets withheld, from whom, on what base, and how you get it back. It matters to two people. The seller who is not a Canadian tax resident. And the buyer, who can end up personally liable for the seller’s tax.
First: “non-resident” means tax residence, not citizenship
This trips people constantly. A Canadian citizen who has lived in Dubai for six years is very likely a non-resident for section 116. A foreign national living in a rented apartment in Etobicoke very likely is not.
CRA treats residence as a question of fact turning on residential ties. Primary ties are a dwelling place in Canada, a spouse or common-law partner here, and dependants here. Secondary ties include personal property, social and economic ties, immigration status, provincial health insurance, a driver’s licence, a Canadian passport and professional memberships. Separately, sojourning in Canada for 183 days or more in a calendar year deems residence under paragraph 250(1)(a).
If your status is genuinely unclear, CRA will rule on it. Form NR73 is for someone leaving Canada, NR74 for someone entering. Do that before you list, not during the conditional period.
25 per cent, not 50 — and the difference is worth arguing about
CRA’s own summary page says “25% (50% on certain types of property)” and does not say which. Plenty of secondary sources fill that gap wrongly. The statute settles it.
Subsection 116(5.2) lists the property that attracts the higher rate: a life insurance policy in Canada, Canadian resource property, “a property (other than capital property) that is real property”, timber resource property, and depreciable property that is taxable Canadian property.
| Situation | Rate | Why |
|---|---|---|
| Non-resident sells a Toronto house or condo held as an investment or a former home | 25 per cent | It is capital property. Subsection 116(5.2) expressly excludes capital property from the real-property category |
| Non-resident builder or flipper sells property held as inventory | 50 per cent | Real property “other than capital property” is squarely inside s. 116(5.2) |
| Non-resident sells a rental property and has claimed capital cost allowance on the building | Both apply | The land and the capital gain go one way; the depreciable building is s. 116(5.2) property. Two forms, two certificates |
An ordinary residential sale by a non-resident who held the property as capital property is at 25 per cent. If someone is telling a seller it is 50, ask them which limb of s. 116(5.2) they say applies.
The two bases, and the error that follows from confusing them
There are two different 25 per cent calculations in section 116, on two different numbers, and they are routinely mixed up.
| Whose 25 per cent | Applied to what | Authority |
|---|---|---|
| The seller’s payment to obtain a certificate | 25 per cent of the excess of proceeds over the adjusted cost base — that is, of the gain | Subsection 116(2); IC72-17R6 describes it as “a flat rate of 25% of the excess of the proceeds of disposition over the adjusted cost base of the property” |
| The buyer’s liability where no certificate is obtained | 25 per cent of the cost of the property to the purchaser — that is, of the whole purchase price | Subsection 116(5) |
That second row is why closings involving non-resident sellers are tense. Without a certificate the buyer’s exposure is a quarter of the entire price, not a quarter of a gain nobody has calculated yet. On a $900,000 condo that is $225,000, and it is the buyer who owes it.
What the certificate does
Under s. 116(2), once the vendor pays 25 per cent of the estimated gain or posts security CRA accepts, the Minister “shall forthwith issue … a certificate … fixing therein an amount … the certificate limit.” The buyer’s exposure then collapses to 25 per cent of the excess of the actual cost over that limit. Where the sale price equals the certified amount, the buyer’s exposure is nil. That is the whole point of the exercise.
The buyer’s defence, and why your lawyer wants a declaration
Subsection 116(5)(a) gives the purchaser an out, and its exact wording is the reason for a piece of paper every Ontario buyer’s lawyer asks for. The liability does not apply where:
“after reasonable inquiry the purchaser had no reason to believe that the non-resident person was not resident in Canada.”
The test is reasonable inquiry, not the seller’s bare assurance. A statutory declaration of residency sworn by the seller is the standard evidence that an inquiry was made. If a seller will not swear one, that is not a paperwork problem. That is the answer.
Where the buyer does have to remit, s. 116(5.3)(b) sets the deadline: within 30 days after the end of the month in which the property was acquired. And the buyer is entitled to withhold the amount from the purchase price and recover it from the seller — which is exactly what the holdback in the agreement is for.
The ten-day notice, and the penalty for missing it
Subsection 116(3) is blunt: every non-resident who disposes of taxable Canadian property “shall, not later than 10 days after the disposition, send to the Minister, by registered mail, a notice”.
Miss it and s. 162(7) applies: $25 for each day the notification is late, minimum $100, maximum $2,500. CRA may waive or cancel it under the taxpayer relief provision in s. 220(3.1) where the delay was due to circumstances beyond the taxpayer’s control.
A source conflict worth knowing about. CRA’s guide T4058 states the $2,500 maximum but omits the $100 minimum. The dedicated penalty page and IC72-17R6 both state the minimum. I have used $100 minimum and $2,500 maximum, which is the position of the two more specific sources.
Which form, and when
| Form | What it is for | Timing |
|---|---|---|
| T2062 | Request for a certificate of compliance on the disposition of taxable Canadian property — the capital gain or loss | Can be filed on a proposed disposition before closing, or after |
| T2062A | The same request for resource or timber property, Canadian real property other than capital property, or depreciable taxable Canadian property. This is the form that reports recapture of capital cost allowance or a terminal loss | Same |
| T2064 | The certificate CRA issues on a proposed disposition, under s. 116(2) — before closing | Issued by CRA |
| T2068 | The certificate CRA issues on a completed disposition, under s. 116(4) — after closing | Issued by CRA |
If the property was a rental and capital cost allowance was ever claimed on the building, both T2062 and T2062A are required. IC72-17R6: “When vendors dispose of depreciable taxable Canadian property, they should use Form T2062 to declare the gain or loss. The recapture of capital cost allowance or terminal loss should be reported on Form T2062A.” Two forms, two certificates. This is the single most commonly missed step, and it is exactly the profile of a non-resident who has owned an Etobicoke condo and rented it out.
How long, and how the money comes back
Here I have to be straight with you about what is not knowable. CRA publishes no service standard for issuing a certificate of compliance. I checked its published service standards and it is not there. IC72-17R6 says only that CRA “will issue the certificate of compliance at the earliest possible date once the necessary information and supporting documentation have been received and validated, and acceptable payment or security has been received.”
You will find “four to six months” quoted widely on accounting blogs. I could not source that to CRA and I am not going to repeat it as if it were official. Plan for a long wait and a holdback that survives it; do not plan around a number nobody published.
The 25 per cent is a payment on account of tax, not the tax. The actual tax is computed on the return:
| Step | What happens |
|---|---|
| 1 | The withheld or remitted amount sits with CRA as a payment on account |
| 2 | The non-resident files a Canadian return for the year of the disposition. For an individual that return is due 30 April of the following year. Corporations file six months after year end; trusts within 90 days |
| 3 | The return reports the actual gain. Tax is computed on the taxable portion of the gain at graduated rates — not on gross proceeds, which is why the 25 per cent is so often far more than the eventual tax |
| 4 | IC72-17R6: “After the return is assessed, any excess payment is refunded or provision is made for the release of security” |
So the money does come back. The question is only when, and the honest answer is that it depends on when in the calendar the sale happened. A February closing means the return is not even due for fourteen months.
The principal residence exemption still exists — partially
A non-resident is not shut out of the principal residence exemption, but it is prorated. IC72-17R6:
“When a non-resident disposes of a principal residence, the non-resident may qualify for an exemption in accordance with paragraph 40(2)(b) or (c) of the Act. However, pursuant to paragraph 40(2)(b), the exemption is limited by the number of years ending after the acquisition date during which the taxpayer was resident in Canada.”
The practical shape of that: someone who lived in an Etobicoke house for twelve years, moved abroad, kept it for six more and then sold gets exemption for the resident years, not all eighteen. Run that calculation with an accountant before you decide when to sell.
Ontario adds nothing on the way out — only on the way in
Ontario has no provincial equivalent of section 116. There is no provincial withholding when a non-resident sells.
Ontario’s non-resident measure runs the other direction. Non-Resident Speculation Tax is 25 per cent, effective 25 October 2022, on residential property anywhere in Ontario, payable where any one of the transferees is a foreign entity or taxable trustee — and on the full value of the consideration, not prorated to the foreign party’s share. That last point catches mixed-status couples and family purchases regularly.
Six things people get wrong
| The belief | What the Act says |
|---|---|
| “I am a Canadian citizen, so section 116 does not apply.” | Citizenship is irrelevant. Residence is a question of fact turning on residential ties, and s. 116 also catches persons deemed non-resident under s. 250(5). |
| “The withholding is 50 per cent on real estate.” | Subsection 116(5.2) reaches real property other than capital property and depreciable TCP. An ordinary residential capital-property sale is 25 per cent. |
| “It is 25 per cent of my profit.” | Only for the seller’s certificate payment under s. 116(2). The buyer’s liability under s. 116(5) is 25 per cent of the cost of the property. |
| “The seller told me they are a resident, so I am covered.” | Subsection 116(5)(a) protects a purchaser who, after reasonable inquiry, had no reason to believe otherwise. Get the statutory declaration. |
| “I only need one form.” | If capital cost allowance was claimed on the building, T2062 reports the gain and T2062A reports the recapture. Two forms, two certificates. |
| “Selling costs me 25 per cent.” | It costs 25 per cent of something, temporarily. It is a payment on account. The actual tax is assessed on the return and the excess is refunded. |
One caveat on sourcing. CRA’s operative guidance, IC72-17R6, is dated 29 September 2011 and there is no R7. CRA republished the files in April 2025 with what it describes as only minor formatting changes. It is still the governing circular, but its administrative detail — addresses, contacts, processes — is fifteen years old, and the 2023 CRA web page supersedes it on how to submit. This is a file for an accountant who does it regularly, not a do-it-yourself exercise.
Selling an Etobicoke property while living outside Canada?
The section 116 clearance has to be planned before the listing goes up, not scrambled during the conditional period, and the holdback has to be written into the agreement properly. I will tell you what the process looks like from the real estate side and coordinate with your accountant and lawyer. If you do not have a Canadian accountant who does section 116 regularly, that is the first call, and I can point you to one. No obligation.
connect@jatindua.com · 437-987-1925 · Book a free consultation
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Three quick steps. Condos don’t price like houses — your floor, your view, and whether you own parking move the number more than anything else. This weighs all of them.
Reading recent condo sales…
Estimated market value
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What moved the number
Starting from what comparable units in your area sell for, here’s what your specifics added or subtracted.
Market context
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Two units, same floor plan,
$90,000 apart.
That happens constantly in condos — one has the parking, the right exposure, or a board that keeps the reserve fund healthy. A model can’t see your status certificate. I can.
Frequently asked questions
Is the withholding 25 per cent or 50 per cent?
For ordinary residential real estate held as capital property it is 25 per cent. Subsection 116(5.2) of the Income Tax Act, which carries the 50 per cent rate, applies to a life insurance policy in Canada, Canadian resource property, real property “other than capital property”, timber resource property, and depreciable property that is taxable Canadian property. A house or condo held as an investment or as a former home is capital property, which s. 116(5.2) expressly excludes. Note that CRA’s own summary page says “25% (50% on certain types of property)” without specifying which, which is where much of the confusion comes from.
Is the 25 per cent taken from my profit or from the sale price?
It depends whose obligation you are looking at. The seller’s payment to obtain a certificate under s. 116(2) is 25 per cent of the excess of proceeds over the adjusted cost base — the gain. The buyer’s liability under s. 116(5), where no certificate is obtained, is 25 per cent of the cost of the property to the purchaser — the whole price. Conflating the two is the classic error, and it matters enormously because the second number is far larger.
Can the buyer be personally liable for the seller’s tax?
Yes. Under s. 116(5) a purchaser who acquires property from a non-resident without a certificate of compliance is liable to pay 25 per cent of the excess of the cost over any certificate limit, as tax on behalf of the non-resident. The purchaser is entitled to withhold that amount from the purchase price and recover it from the vendor, and must remit within 30 days after the end of the month in which the property was acquired.
What protects a buyer who did not know the seller was a non-resident?
Paragraph 116(5)(a) provides that the liability does not apply where, “after reasonable inquiry the purchaser had no reason to believe that the non-resident person was not resident in Canada”. The standard is reasonable inquiry, not the seller’s bare assurance, which is why buyers’ lawyers require a sworn statutory declaration of residency from the seller. A seller who refuses to swear one has effectively answered the question.
How long does a certificate of compliance take?
CRA publishes no service standard for it. I checked CRA’s published service standards and there is none. IC72-17R6 says only that CRA will issue the certificate “at the earliest possible date” once the information, documentation and acceptable payment or security have been received and validated. Figures like “four to six months” circulate widely on accounting websites but I could not source any of them to CRA, so I am not repeating them as fact. Plan for a long wait and structure the holdback to survive it.
Do I get the money back?
The amount withheld or remitted is a payment on account of tax, not the tax itself. The non-resident files a Canadian return for the year of the disposition — due 30 April of the following year for an individual — reporting the actual gain, on which tax is computed at graduated rates on the taxable portion. IC72-17R6 states that after the return is assessed, any excess payment is refunded or provision is made for the release of security. Because the 25 per cent is calculated before deductions and on a gross basis, the refund is often substantial.
Can a non-resident still claim the principal residence exemption?
Partially. IC72-17R6 states that a non-resident disposing of a principal residence may qualify for an exemption under paragraph 40(2)(b) or (c), but that the exemption “is limited by the number of years ending after the acquisition date during which the taxpayer was resident in Canada”. So years of non-residence do not attract the exemption. Anyone who lived in a property, moved abroad and held it should run this calculation with an accountant before choosing a sale date.
Does Ontario charge anything when a non-resident sells?
No. Ontario has no provincial equivalent of section 116 and imposes no withholding on a non-resident’s sale. Ontario’s non-resident measure is the Non-Resident Speculation Tax, which is a buyer-side tax of 25 per cent effective 25 October 2022 on residential property anywhere in Ontario, payable where any one of the transferees is a foreign entity or taxable trustee, and calculated on the full value of the consideration rather than being prorated to the foreign party’s share.
What if the property was rented out?
Then check whether capital cost allowance was ever claimed on the building. If it was, you need two forms: T2062 to declare the capital gain or loss, and T2062A to report the recapture of capital cost allowance or a terminal loss. CRA issues a separate certificate for each. This is the most commonly missed step for a non-resident who owned and rented a condo, and it will hold up the closing if it surfaces late.
Related reading
- Non-Resident Speculation Tax in Ontario: who pays, who is exempt
- Capital gains tax when selling a home in Ontario
- Selling an inherited property in Ontario as estate trustee
- The real cost of buying and selling a home in the GTA
Sources
Every figure on this page traces to one of these, and each was read on 30 August 2026. Primary sources only — statute, regulation, and the government or agency that administers the rule. Where I could not verify something from a primary source, the page says so instead of guessing.
- Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) — section 116. Justice Laws Website consolidation. Last amended 18 June 2026, current to 21 June 2026. Subsections 116(2), (3), (4), (5), (5.2) and (5.3) read directly. Accessed 30 August 2026.
- IC72-17R6, Procedures Concerning the Disposition of Taxable Canadian Property by Non-Residents of Canada — Section 116. Canada Revenue Agency information circular dated 29 September 2011. Still the current version — there is no R7. CRA republished the files on 7 April 2025 with what it describes as only minor formatting changes. Treat the administrative detail, such as addresses and contacts, as dated. Accessed 30 August 2026.
- Failure to comply penalty — non-resident vendor notification on the disposition of taxable Canadian property. Canada Revenue Agency, date modified 9 April 2025. States the penalty as $25 a day for each day the notification is late, with a minimum of $100 and a maximum of $2,500. Accessed 30 August 2026.
- Disposing of or acquiring certain Canadian property. Canada Revenue Agency, date modified 27 June 2023. Sets out the submission channels and the requirement that a non-resident disposing of property have a Canadian tax identification number. Accessed 30 August 2026.
- T4058, Non-Residents and Income Tax. Canada Revenue Agency guide, date modified 20 January 2026, current for the 2025 tax year. Note: this guide states the penalty maximum but omits the $100 minimum that appears on the dedicated penalty page and in IC72-17R6. Accessed 30 August 2026.
- Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status. Canada Revenue Agency, date modified 20 January 2026. Residence is a question of fact turning on residential ties. Sojourning 183 days or more in a calendar year deems residence under paragraph 250(1)(a). Accessed 30 August 2026.
- Form T2062, Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property. Canada Revenue Agency form page, date modified 25 June 2025. Accessed 30 August 2026.
- Form T2062A, Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Canadian Resource or Timber Resource Property, Canadian Real Property (Other Than Capital Property), or Depreciable Taxable Canadian Property. Canada Revenue Agency form page, date modified 4 December 2023. Used to report recapture of capital cost allowance or a terminal loss. Accessed 30 August 2026.
- Non-Resident Speculation Tax. Government of Ontario, last updated 4 May 2026. NRST is 25 per cent effective 25 October 2022, applies to residential property anywhere in Ontario, and is payable on the full value of the consideration where any one transferee is a foreign entity or taxable trustee. Accessed 30 August 2026.
About the author — Jatin Dua, Etobicoke real estate agent
I’m the Broker of Record at RE/MAX Quantum Realty, 799 The Queensway in Etobicoke. I write these pages the same way I work a file: read the primary source, quote it, date it, and say plainly where the source is silent or where two sources disagree. If a figure on this page has no citation beside it, that is a mistake and I want to hear about it.
I work with buyers, sellers, renters and investors across Etobicoke, Mimico, Humber Bay Shores, New Toronto, Long Branch, Alderwood and Stonegate–Queensway. connect@jatindua.com or 437-987-1925.