Do non-resident sellers need CRA clearance to sell Canadian property?

A non-resident seller may need to notify the Canada Revenue Agency and obtain a certificate of compliance under section 116 of the Income Tax Act. Until the certificate is obtained, the buyer may become responsible for withholding and remitting 25% of the gross purchase price, rising to 50% for certain property types.

Is the CRA holdback based on my profit or the sale price?

On the gross sale price, not the gain. A sale at $900,000 has the holdback measured against $900,000 regardless of what was paid for the property, what is owed on the mortgage, or whether any profit was made. This is what surprises most non-resident sellers.

How does the CRA holdback affect buying another property?

It can lock up a substantial share of the sale proceeds on the very day they are needed for a down payment elsewhere. Solutions include starting the compliance process early, avoiding a same-day sale and purchase chain, arranging short-term bridge financing to cover the gap, and building the holdback into the plan on the assumption the funds will be late.

Answers › Non-Residents & Foreign Buyers

I’m a non-resident selling Canadian property. What’s the CRA holdback?

Answered by Rajiv Verma, Mortgage Broker · Position as at August 2026 · About a 4 minute read

⏱ This is tax and legal territory. The page explains the mechanism and why it matters to your financing. Your actual obligations must be confirmed by a lawyer and an accountant.

The direct answer

A non-resident seller may need to notify the CRA and obtain a certificate of compliance under section 116 of the Income Tax Act. Until that certificate is obtained, the buyer may become responsible for withholding and remitting 25% of the gross purchase price — rising to 50% for certain property types. That’s based on the sale price, not on your gain. In practice the buyer’s lawyer holds back a substantial share of the proceeds until the certificate arrives.

THE SHORT VERSION

Applies to non-resident sellers, and it’s separate from the foreign buyer ban
The buyer’s lawyer may hold back 25% of the gross sale price
Up to 50% for certain property types
Calculated on price, not profit — which is what surprises people
It can wreck a plan to use the proceeds as a down payment elsewhere

Why this catches people out

Two things make it worse than expected.

First, it’s calculated on the gross sale price rather than the gain. Sell for $900,000 and the holdback is measured against $900,000 — regardless of what you paid, what’s owed on the mortgage, or whether you made any profit at all.

Second, it isn’t the seller who withholds. The obligation sits with the buyer, which is why the buyer’s lawyer will insist on holding the money until the CRA certificate of compliance is produced. No lawyer will release funds and take that risk on your behalf.

The financing problem this creates

This is where it becomes my problem as well as your lawyer’s.

If you’re selling one property to fund the down payment on another, a substantial share of your proceeds may be locked up on the day you need them. The purchase closes, the down payment is due, and the money is sitting in a lawyer’s trust account waiting on a certificate.

Discovered late, that is a missed closing. Anticipated early, it is a solvable financing question.

How it’s usually solved

Start the compliance process early. Well before closing, not after. Your accountant and lawyer handle the notification and the certificate application — timing is the main variable and it’s largely within your control if you begin in good time.

Don’t plan a same-day chain. Selling and buying on the same date is difficult in any circumstances; with a section 116 holdback in play it’s asking for trouble.

Arrange bridge financing. Where the timing genuinely can’t be helped, short-term financing can cover the gap between closing the purchase and the holdback being released. That has a cost, and it’s far cheaper than a collapsed transaction.

Build the holdback into your numbers from the start. Assume the money is unavailable at closing unless the certificate is confirmed in hand.

What to check

Whether you are a non-resident for tax purposes — an accountant’s determination, not a self-assessment
The property type, since it affects whether the higher rate applies
When the compliance process was started — earlier is the whole game
What proceeds you’ll actually receive on closing day, as opposed to eventually
Whether your onward purchase depends on those funds — and what happens if they’re late

What to do next

Speak to your accountant and lawyer first — the tax determination and the certificate are theirs to handle, not mine.

Then talk to me about the financing. If you’re buying with the proceeds, I’ll structure it so a delayed holdback doesn’t collapse the purchase — which usually means planning for the money to be late rather than hoping it won’t be.

Talk it through →

Related questions

Answered by Rajiv Verma, Mortgage Broker · Mortgage Architects — FSRA Brokerage Licence #12728 · Licensed in Ontario · Office 289.505.0631 · Direct 647.291.7116

This page provides general educational information only and is not legal, accounting or tax advice. Residency determination, section 116 compliance and withholding obligations must be advised on by a qualified accountant and real estate lawyer. Position stated as at August 2026.