Selling Canadian Real Estate as a Non-Resident: Tax Rules Explained

Last updated: Dec 16,  2025

Selling Canadian real estate as a non-resident involves more than a standard property transaction. Canada imposes specific tax and reporting obligations on non-residents to ensure capital gains are properly reported and collected. These rules are strict, time-sensitive, and frequently misunderstood.

Failure to comply can result in significant withholding, penalties, and delays in releasing sale proceeds. Understanding how the rules work before selling is critical for both tax efficiency and smooth closing.

Who Is Considered a Non-Resident for Real Estate Tax Purposes? 

For Canadian tax purposes, residency is based on facts and residential ties, not citizenship. You are generally considered a non-resident if you have left Canada and severed or significantly reduced your primary residential ties.

Once you are a non-resident, the sale of Canadian real estate becomes subject to special non-resident tax rules, even if the property was acquired while you were a Canadian resident.

👉 Read more: Non-Resident tax filing obligations

Does Canada Tax Non-Residents on the Sale of Real Estate? 

Yes. Canada retains the right to tax capital gains arising from Canadian real estate, regardless of the seller’s residency status. This includes residential properties, rental properties, vacation homes, and certain interests in real-estate-holding entities.

The taxable amount is generally the capital gain, calculated as the difference between the sale price and the property’s adjusted cost base, less selling costs.

What Is the Non-Resident Withholding Requirement?

When a non-resident sells Canadian real estate, the buyer is required to withhold a portion of the sale price and remit it to the CRA unless the seller obtains a Certificate of Compliance.

The default withholding is generally 25% of the gross sale price (or 50% in certain cases involving depreciable property), which often far exceeds the actual tax owing. This withholding is designed to protect the CRA if the seller fails to report the sale.

What Is a Certificate of Compliance (Section 116)?

A Certificate of Compliance is issued by the CRA under Section 116 of the Income Tax Act. It confirms that the non-resident seller has either paid or secured the estimated Canadian tax on the sale.

To obtain the certificate, the seller must notify the CRA of the sale and provide details such as the purchase price, sale price, cost base, and estimated gain. Once issued, the certificate limits the buyer’s withholding obligation to the estimated tax rather than the full gross proceeds.

What Happens If No Certificate Is Obtained? 

If the seller does not obtain a Certificate of Compliance, the buyer is legally required to withhold and remit the full statutory amount. Buyers who fail to withhold can become personally liable for the tax, interest, and penalties.

From the seller’s perspective, failing to obtain the certificate often results in significant cash-flow disruption, as excess withholding may only be recoverable after filing a Canadian tax return.

Do Non-Residents Have to File a Canadian Tax Return After the Sale? 

Yes. Selling Canadian real estate as a non-resident generally requires filing a Canadian income tax return to report the disposition and calculate the actual capital gains tax payable.

Any tax withheld at closing is applied as a credit against the final tax liability. If too much tax was withheld, a refund may be issued after assessment.

What About the Principal Residence Exemption? 

The principal residence exemption may be available in limited circumstances, but it is much more restrictive for non-residents. Generally, years during which you were a non-resident do not qualify, and special reporting rules apply.

Claiming the exemption incorrectly is a common error and can trigger reassessment and penalties.

How Do Tax Treaties Affect the Sale? 

Canada’s tax treaties, including the Canada–U.S. tax treaty, generally do not eliminate Canada’s right to tax gains on Canadian real estate. However, treaties are critical for avoiding double taxation by allowing foreign tax credits in the seller’s country of residence.

Proper coordination between Canadian and foreign tax filings is essential.

Common Mistakes Non-Residents Make When Selling Property 

Frequent issues include failing to apply for a Certificate of Compliance on time, misunderstanding withholding requirements, assuming tax treaties eliminate Canadian tax, and neglecting post-sale filing obligations.

These mistakes can lead to unnecessary withholding, penalties, and delays in recovering funds.

Final Thoughts

Selling Canadian real estate as a non-resident is a high-risk tax transaction if not handled properly. While Canada’s rules are designed to protect tax collection, they can be managed efficiently with advance planning and timely compliance.

For non-residents, addressing withholding requirements, certificates, and filing obligations early can significantly reduce cash-flow disruption and prevent costly errors.

Frequently Asked Questions (FAQs) 

Do non-residents pay tax when selling Canadian real estate?

Yes. Canada taxes non-residents on capital gains arising from the sale of Canadian real estate. The tax applies regardless of where the seller lives or their citizenship status. 

What is the non-resident withholding tax when selling property in Canada? 

When a non-resident sells Canadian real estate, the buyer is generally required to withhold 25% of the gross sale price and remit it to the CRA unless the seller obtains a Certificate of Compliance. This withholding is intended to secure the tax owing on the sale. 

What is a Certificate of Compliance (Section 116)? 

A Certificate of Compliance is issued by the CRA under Section 116 of the Income Tax Act. It confirms that the non-resident seller has reported the sale and paid or secured the estimated Canadian tax. Obtaining this certificate reduces withholding to the estimated tax instead of a percentage of the gross proceeds. 

What happens if a non-resident seller does not get a Certificate of Compliance? 

If no certificate is obtained, the buyer must withhold and remit the full statutory amount. Buyers who fail to do so can become personally liable for the tax, interest, and penalties. Excess withholding may only be recovered after filing a Canadian tax return. 

Do non-residents have to file a Canadian tax return after selling property?

Yes. Non-residents must generally file a Canadian income tax return to report the sale and calculate the actual capital gains tax payable. Any withholding at closing is credited against the final tax liability. 

Can non-residents claim the principal residence exemption? 

In limited cases, yes. The principal residence exemption is much more restricted for non-residents, and years of non-residency typically do not qualify. Special reporting rules apply, and incorrect claims are a common source of reassessment. 

Does the Canada–U.S. tax treaty eliminate Canadian tax on property sales?

No. Tax treaties generally do not remove Canada’s right to tax gains from Canadian real estate. Treaties are important, however, for avoiding double taxation by allowing foreign tax credits in the seller’s country of residence. 

How is the capital gain calculated for non-residents?

The capital gain is generally calculated as the difference between the sale price and the property’s adjusted cost base, minus selling expenses. Only a portion of the gain is taxable under Canadian capital gains rules. 

What are common mistakes non-residents make when selling Canadian property? 

Common mistakes include failing to apply for a Certificate of Compliance on time, misunderstanding withholding requirements, assuming tax treaties eliminate Canadian tax, and neglecting post-sale filing obligations. 

Should non-residents get professional advice before selling Canadian real estate? 

Yes. Selling Canadian property as a non-resident involves strict timelines, withholding rules, and cross-border tax coordination. Professional advice can help reduce withholding, ensure compliance, and avoid costly errors.