Published 2 November 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty
When a non-resident sells an Ontario home in 2027, the buyer holds back 25% of the full price (50% for depreciable or inventory property) unless the seller gets a CRA clearance certificate. To get one, you file Form T2062 within 10 days of the sale and pay 25% of the gain. Budget 2026 cuts rates only for corporate sellers.
This guide is for people who own a home or condo in Ontario but live outside Canada, including Canadians who moved abroad and now want to sell. You will learn what section 116 of the Income Tax Act holds back at closing, how to get a clearance certificate, what Budget 2026 proposes to change from 1 January 2027, and how to plan so more of your money arrives sooner.
Who counts as a non-resident when you sell a home in Ontario?
Section 116 is about tax residence, not citizenship. A Canadian citizen who has lived in Dubai for years can be a non-resident for tax. A foreign worker who lives in Mississauga is usually a resident. What matters is your ties to Canada on the day you sell.
The Canada Revenue Agency (CRA) looks first at three significant ties: a home in Canada that is available to you, a spouse or common-law partner here, and dependants here. It then looks at secondary ties, such as a provincial health card, a driver’s licence, Canadian bank accounts and memberships. Someone who spends 183 days or more in Canada in a calendar year can also be deemed a resident for that year.
If your status is unclear, Form NR73 (for people who have left Canada) asks CRA for its opinion. The opinion is not binding, but it gives your accountant something solid to work from. Settle this question before you list, not during the conditional period of an offer.
How much is withheld when a non-resident sells property in Canada?
There are two different 25% numbers, and mixing them up causes most of the panic.
- The buyer’s holdback: if you do not deliver a clearance certificate by closing, the buyer becomes liable for 25% of the whole purchase price for an ordinary home or condo held as capital property. For “specified” property, such as a rental building on which you claimed capital cost allowance (depreciation) or real estate held as inventory, the rate is 50%.
- Your payment to get a certificate: to get the certificate, you pay CRA 25% of your gain, which is the sale price minus your adjusted cost base (what you paid plus eligible costs). You can post security instead of cash if CRA accepts it.
| Example: condo sold by a non-resident | Amount |
|---|---|
| Sale price (the Jan–Oct 2026 median for a C01 downtown Toronto condo apartment) | $600,000 |
| Adjusted cost base (hypothetical purchase price plus eligible costs) | $450,000 |
| Gain | $150,000 |
| Buyer’s holdback with no certificate (25% of price) | $150,000 |
| Your payment to get a certificate (25% of gain) | $37,500 |
Source: Income Tax Act s. 116(2) and (5); sale price from TRREB MLS data via REALM, January–October 2026. The cost base is a made-up figure for illustration.
Neither number is your final tax. Both are payments on account. Your real tax is worked out on a Canadian tax return, where only half of a capital gain on ordinary capital property is taxable (Budget 2026 confirms the one-half inclusion rate still applies). If you paid too much, CRA refunds the difference after it assesses the return. For how the gain itself is taxed, see my guide to capital gains tax when selling a home in Ontario.
What changes for non-resident sellers in 2027?
Budget 2026, released in November 2026, proposes three changes to section 116 for sales that happen on or after 1 January 2027:
- Lower rates for corporate sellers. When the seller is a non-resident corporation, the rates would drop from 25% and 50% to 15% and 30%.
- No withholding on fully tax-deferred section 85 rollovers, as long as the election is filed and the purchaser sends CRA a notice within 30 days.
- A longer anti-avoidance window for rollovers by non-residents, from three years to five.
| Type of property | Today (and for individuals in 2027) | Proposed for non-resident corporations from 1 Jan 2027 |
|---|---|---|
| Capital property (most homes and condos) | Buyer withholds 25% of price; certificate costs 25% of gain | 15% of price; 15% of gain |
| Specified property (depreciable, inventory) | Buyer withholds 50% of price | 30% of price |
Source: Department of Finance Canada, Budget 2026, Tax Measures: Supplementary Information, “Taxable Canadian Property”. Proposals are not law until Parliament passes them.
If you own your Ontario home in your own name, nothing changes in 2027. Your rates stay at 25% and 50%. If you hold property through a foreign corporation, ask your accountant whether waiting for a 2027 closing date makes sense, and remember these are still proposals.
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How do you get a section 116 clearance certificate?
The certificate (officially a certificate of compliance) is CRA’s confirmation that it has been paid, or secured, for your tax. Here is the process, in order:
- Get a Canadian tax number. If you never had a Social Insurance Number, apply for an Individual Tax Number (ITN) with Form T1261. CRA asks you to send it separately and in advance, because bundling it with your request causes delays.
- Collect your paperwork. The signed agreement of purchase and sale, your original purchase documents and receipts for capital improvements.
- File Form T2062. If the home was a rental and you ever claimed capital cost allowance on the building, you also need Form T2062A. You can file before closing for a proposed sale, and you must notify CRA no later than 10 days after closing.
- Pay or post security. Send 25% of the estimated gain, or arrange security that CRA accepts.
- Submit it. You or your representative can upload through My Account, Represent a Client or My Business Account using “Submit documents”. By mail, Ontario properties go to the Section 116 Centre of Expertise in Ottawa.
CRA issues Form T2064 for a proposed sale or Form T2068 for a completed one. Missing the 10-day notice costs $25 a day, with a minimum of $100 and a maximum of $2,500.
What happens on closing day if the certificate is not ready?
Most Ontario resale deals use the standard OREA agreement, which has a residency paragraph. The seller confirms they are not a non-resident and gives the buyer a statutory declaration saying so. If the seller is a non-resident, the buyer gets a credit on the price for the amount needed to cover the buyer’s tax exposure, unless the seller hands over the certificate on closing.
In practice, the buyer’s lawyer holds back 25% of the price (50% for specified property) in trust. LawPRO’s section 116 checklist for Ontario lawyers adds some useful points:
- If only one co-owner is a non-resident, the holdback applies only to that owner’s share.
- Unless CRA issues the certificate or a comfort letter first, the buyer must send the holdback to CRA within 30 days after the end of the month in which closing happened.
- CRA needs at least 30 days before closing to issue a certificate, and the checklist warns to expect longer.
Once your certificate arrives, the lawyer releases whatever part of the holdback is not needed. For the normal timing of sale money, see when sellers get paid after closing in Ontario.
Never sign a residency declaration that is not true. The buyer is protected only if, after reasonable inquiry, they had no reason to believe you were a non-resident. Signs such as a mailing address outside Canada can count against the buyer. If a buyer ends up paying your tax, they will come after you for it, and your sale can turn into a lawsuit.
How long until you get the rest of your money?
CRA’s section 116 page does not promise a processing time, so do not plan around one. Your money comes back in two stages:
- When the certificate is issued: the lawyer releases the holdback, less what CRA kept.
- After you file your Canadian return: individuals file by 30 April of the year after the sale and attach copy 2 of the certificate. CRA then refunds any amount it took beyond your real tax.
That second stage can be a long way off. If you close in March 2027, your return is not due until 30 April 2028. One more detail: CRA’s certificate calculation uses your sale price and cost only. Selling costs such as commission and legal fees are claimed on the return, which is one reason a refund often follows.
Can you still use the principal residence exemption after moving abroad?
Yes, but usually only in part. Under section 40(2)(b) of the Income Tax Act, the share of your gain that is exempt depends on the years the home was your principal residence while you were a resident of Canada, divided by the years you owned it. You get one extra year in the count only if you were a Canadian resident in the year you bought.
A simple example: you bought in 2012, lived there as a Canadian resident from 2012 to 2019 (8 years), became a non-resident from 2020 and sell in 2027 (16 years of ownership). About (1 + 8) ÷ 16, or 9/16 of the gain, could be sheltered if you designate those years. The rest is taxable. An accountant who does section 116 work regularly should run your own numbers.
What can delay a section 116 certificate?
- Missing documents or tax numbers. An incomplete T2062 sits until CRA gets what it asked for.
- Underused Housing Tax filings. CRA says it may refuse a certificate if you are an “affected owner” who has not met your Underused Housing Tax filing or payment obligations. Ask your accountant whether you missed any past returns.
- A rental with depreciation claimed. You need both T2062 and T2062A, and the building portion sits at the 50% rate. If you collect rent while abroad, read how non-resident rent withholding works.
- Several owners. Each non-resident owner needs their own filing and tax number.
Start 60 to 90 days before the listing goes live. Have your accountant ready to file T2062 as a proposed sale as soon as you accept an offer, get the tax numbers in place early, and agree to a closing date that leaves room for CRA. With TRREB reporting October 2026 GTA sales down 7.9% from a year earlier and the average price at $1,024,108, buyers are taking their time. A well-documented sale with no closing-day surprises helps keep them at the table. For the full statute-level detail, my earlier deep dive on section 116 goes clause by clause.
What to do next
- Confirm your tax residence with an accountant, and use Form NR73 if it is unclear.
- Apply for an Individual Tax Number now if you do not have a Social Insurance Number.
- Pull together your purchase documents and improvement receipts, and check for any missed Underused Housing Tax returns.
- Get a realistic price so your accountant can estimate the gain and the 25% payment. My guide to seller closing costs in Ontario for 2027 helps you net it out.
- Set a closing date that leaves CRA at least 30 days after you file, and tell your lawyer you are a non-resident on day one.
Need help with this? Talk to me.
I’m Jatin Dua, Broker of Record at RE/MAX Quantum Realty, and I’m the best agent to do this kind of work for you in Toronto and across the GTA. Over $100 million in GTA sales and 100+ families helped sell. Feel free to contact me any time: call or text 833-330-1925 or email [email protected].
Frequently asked questions
Do non-residents pay tax when selling property in Canada?
Yes. A non-resident who sells Canadian real estate owes Canadian tax on the gain, and section 116 of the Income Tax Act makes sure CRA collects it at closing. In Ontario in 2027, the buyer holds back 25% of the price for an ordinary home unless the seller gets a clearance certificate. The final tax is worked out on a Canadian return, and any overpayment is refunded.
What is a section 116 clearance certificate?
A section 116 clearance certificate is CRA’s confirmation that a non-resident seller has paid or secured the tax on a sale of Canadian property. The seller applies on Form T2062, pays 25% of the gain or posts security, and CRA issues Form T2064 for a proposed sale or T2068 for a completed one. Once the buyer has it, the large holdback on the purchase price can be released.
How much is withheld when a non-resident sells a house in Ontario in 2027?
For an individual selling an ordinary house or condo in Ontario in 2027, the buyer withholds 25% of the full purchase price if no clearance certificate is delivered. The rate is 50% for specified property, such as a rental building where depreciation was claimed. Budget 2026 proposes lower rates of 15% and 30% only for non-resident corporations, starting 1 January 2027.
Is non-resident withholding tax 25% of the sale price or the profit?
Both numbers exist, for different people. The buyer’s liability, when no certificate is issued, is 25% of the whole sale price. The seller’s payment to get a certificate is 25% of the gain, meaning the sale price minus the adjusted cost base. On a $600,000 Toronto condo with a $150,000 gain, that is $150,000 versus $37,500.
How long does it take to get a section 116 certificate?
CRA does not publish a fixed processing time for section 116 certificates. LawPRO’s checklist for Ontario lawyers says CRA needs at least 30 days before closing and warns that it often takes longer. Non-resident sellers in the GTA should file Form T2062 as a proposed sale well before closing and expect their lawyer to hold back part of the price until the certificate arrives.
Do I need a clearance certificate if I am a Canadian citizen living abroad?
Yes, if you are a non-resident for tax purposes. Section 116 depends on tax residence, not citizenship. A Canadian citizen who has moved abroad and cut their main ties to Canada, such as a home, spouse and dependants here, is generally a non-resident and must follow the section 116 rules when selling an Ontario home in 2027.
When must a non-resident notify CRA after selling a property?
A non-resident must notify CRA no later than 10 days after the sale, usually by filing Form T2062. The notice can also be filed before closing for a proposed sale. Missing the deadline costs $25 for each day late, with a minimum penalty of $100 and a maximum of $2,500, under the Income Tax Act.
Does Budget 2026 change the non-resident withholding rate?
Only for corporations, and only as a proposal. Budget 2026 proposes cutting section 116 rates for non-resident corporate sellers from 25% and 50% to 15% and 30% for sales on or after 1 January 2027. Individuals who own an Ontario home in their own name keep the 25% and 50% rates. The change is not law until Parliament passes it.
Can a non-resident seller get the withheld money back?
Yes, any amount above the real tax is refunded after CRA assesses your Canadian return. Individuals file by 30 April of the year after the sale and attach copy 2 of the certificate. Only half of a capital gain is taxable, and selling costs are claimed on the return, so many non-resident sellers in the GTA get part of the 25% back.
Who pays section 116 tax if the seller has no certificate, the buyer or the seller?
The buyer is legally liable if no certificate is issued and they had reason to believe the seller was a non-resident. That is why Ontario buyers’ lawyers hold back 25% or 50% of the price and send it to CRA within 30 days after the end of the closing month. The tax is still the seller’s, so the buyer keeps that amount from the sale proceeds.
Sources
- Justice Laws: Income Tax Act, section 116
- Justice Laws: Income Tax Act, section 40 (principal residence formula)
- Canada Revenue Agency: Disposing of or acquiring certain Canadian property
- Department of Finance Canada: Budget 2026, Tax Measures: Supplementary Information
- Canada Revenue Agency: Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status
- LawPRO practicePRO: Section 116 ITA checklist (2024)
- BDO: Canada, dispositions of taxable Canadian property by non-residents (October 2025)
- TRREB Market Watch, October 2026
Related reading
- Foreign Buyer Ban 2027: What Budget 2026 Changes (Extension to 2029, New Homes Exempt)
- Can Foreigners Buy New Construction Condos in Toronto in 2027?
- Foreign Buyer Ban Exemptions in Canada for 2027: Who Can Still Buy
- Can International Students Buy a Home in Ontario in 2027?
About the author — Jatin Dua, Toronto and GTA real estate broker
I am Jatin Dua, Broker of Record and co-founder of RE/MAX Quantum Realty Inc., Brokerage, Unit 101, 799 The Queensway, Toronto. I work with buyers and sellers across Toronto and the GTA and have helped more than 100 families sell. Four-plus years of active GTA transactions and over $100 million in sales volume.
Reach me at [email protected] or 833-330-1925, or book a call.