I’ve received several inquiries around the same question recently:
“What is the difference between selling property as a non-resident versus a local resident in Canada?”
The answer is straightforward:
The biggest difference is not the sale price —
It is the possibility that you may need to provide a significant amount of cash before the transaction can be completed.
It Is Not the Same Process
Many assume that all real estate transactions follow the same process. In reality, non-resident sellers are subject to additional requirements.
One of the most critical is obtaining a CRA Clearance Certificate.
What Happens Without a Clearance Certificate
If the certificate is not obtained prior to closing, the seller’s lawyer is required to withhold funds from the sale proceeds.
This withholding is substantial:
- Approximately 25% of the sale price for a principal residence
- Up to 50% for rental or investment properties
It is important to note that this is calculated based on the sale price, not the profit.
Why Withholding Is Required
Many sellers are surprised by this, especially when the property is being sold at a loss.
The reason is that the Canada Revenue Agency must ensure that any potential tax liability is covered. If this is not done, the buyer may be held liable for the unpaid tax.
As a result, the system is designed to protect the government’s interest first.
Required Steps
Non-resident sellers must complete the following:
- Notify the CRA within 10 days of closing
- Submit Form T2062
- Apply for a Clearance Certificate
Once the CRA reviews the application and confirms the tax position, the withheld funds can be released.
Timing Considerations
The review process typically takes 8 to 12 weeks, and in some cases longer.
A Practical Challenge in Today’s Market
In a declining or flat market, this creates a real issue for many sellers.
After withholding 25% to 50% of the sale price, the remaining proceeds may not be sufficient to:
- Fully discharge the mortgage
- Cover real estate commissions
- Pay legal fees
- Address mortgage prepayment penalties
Available Options
In practice, sellers generally consider one of the following approaches:
- Use personal funds to cover any shortfall and wait for the CRA to release the withheld amount
- Consult with an accountant to review tax residency status and prior filings
- Negotiate a delayed closing to allow time for the Clearance Certificate to be issued
A Common Question
Some sellers ask whether withholding can be avoided if there is no capital gain.
In practice, this is rarely feasible.
From the perspective of a buyer or their legal representative, agreeing to proceed without withholding would involve taking on significant risk.
Conclusion
Selling property as a non-resident is not simply a transaction — it is a tax-driven process that directly impacts liquidity and timing.
Understanding these requirements in advance allows for better planning and helps avoid unnecessary complications at closing.
If you are considering selling as a non-resident, it is advisable to review your situation early and plan accordingly.
