Three things non-residents get wrong
Under Section 116 of the Income Tax Act, advance planning is the only way to avoid having large amounts of sale proceeds frozen — and it typically requires starting the process at least 60 days before closing.
25% withheld on gross proceeds, not just the gain
Without a T2062 clearance certificate, the buyer must withhold 25% of the gross sale price (50% for depreciable property). With a certificate, withholding is reduced to 25% of the actual capital gain. On a $1M property with a $200K gain: without the certificate, $250,000 is withheld — with it, only $50,000. The difference is not recovered quickly, and interest accrues in the meantime.
Rental income obligations are often overlooked
Non-resident landlords must report Canadian rental income and manage withholding obligations on gross rents. A Section 216 election allows reporting net rental income rather than gross — which can substantially reduce the actual tax burden. Many non-resident landlords are unaware of this option and overpay as a result.
The clearance certificate process takes time
CRA processing times for T2062 applications can vary significantly. Starting too late can delay or complicate closing. Early preparation also allows time to assess principal residence exemption eligibility, confirm your adjusted cost base, and coordinate with your real estate lawyer before the sale is finalized.
Key steps for selling Canadian property
Before closing
- Confirm adjusted cost base (ACB) and capital improvements
- Assess principal residence exemption eligibility
- Prepare and submit T2062 clearance certificate application
After closing
- Coordinate withholding arrangements with buyer's lawyer
- File final Canadian tax return for the disposition
- Apply for refund of excess withheld amounts
Frequently asked questions
As a non-resident selling Canadian property, what is the Section 116 withholding requirement?
Under Section 116 of the Income Tax Act, the buyer is required to withhold 25% of the gross sale price (50% for depreciable property) and remit it to CRA unless the seller has obtained a clearance certificate in advance. If a T2062 clearance certificate is obtained before closing, withholding is reduced to 25% of the actual capital gain — which can be significantly less than 25% of full proceeds. The difference can amount to tens of thousands of dollars depending on the property value and appreciation.
I sold my Canadian property without obtaining a clearance certificate — what are the consequences?
If no clearance certificate was obtained, the buyer's lawyer should have withheld 25% of the gross proceeds. If they did not, both the buyer and seller may be liable to CRA for the unremitted amount, plus interest. As the seller, you are still required to file a final Canadian tax return reporting the disposition. You may be entitled to a refund of excess withholding once the actual tax on the gain is calculated — but this requires filing the correct returns and coordinating with CRA. The longer this remains unaddressed, the more interest accrues. We can help you assess the current situation and work toward resolution.
I'm planning to sell my Canadian property next year as a non-resident — when should I start the process?
We recommend beginning at least 60 days before your anticipated closing date. The T2062 clearance certificate application requires documentation of your adjusted cost base, capital improvements, and selling costs. CRA processing times can vary, and delays can complicate or postpone closing. Early preparation also allows time to assess principal residence exemption eligibility and coordinate with your real estate lawyer before the sale is finalized.
Starting the clearance certificate process at least 60 days before closing protects against delays and unnecessary withholding. Initial conversations are confidential.
Start a confidential conversation