Non-Resident Selling Property in Canada: Section 116, the 25% Holdback and What You Really Owe
Sell a Vancouver condo while you live outside Canada, and the buyer's lawyer will usually hold back 25% of the price on completion day. Not 25% of your profit. 25% of the whole price. On a $1.2 million condo that's $300,000 sitting in a trust account, and if the unit was a rental, the number can go higher.
That money isn't a tax. It's security. It comes back to you once the Canada Revenue Agency (CRA) issues a clearance certificate under section 116 of the Income Tax Act, and the tax you actually owe is usually a fraction of it. The catch is time: the Canadian Bar Association and CPA Canada told CRA in a January 2025 letter that it "generally takes many months to over a year" to get that certificate.
Below: how it works, what the holdback looks like at today's asking prices, and a worked example of what's held versus what's owed.
Source: Income Tax Act s. 116(3), (5), (5.3); s. 120(1).
How section 116 works
Canada taxes non-residents on gains from "taxable Canadian property", and real estate here is the textbook case. Section 116 makes sure CRA collects before the money leaves the country, and it does that by putting the risk on the buyer.
Under subsection 116(5), a buyer who acquires taxable Canadian property from a non-resident is personally liable for 25% of the purchase price, unless one of three things is true: CRA has issued a certificate for the sale, the buyer made a reasonable inquiry and had no reason to believe the seller was non-resident, or a treaty exception applies. The buyer has to remit that amount within 30 days after the end of the month of purchase, and the law lets the buyer withhold it from what they pay you.
No buyer's lawyer wants their client on the hook for a quarter of the price, so the full amount stays in trust until you produce a certificate. On paper the buyer has to remit within 30 days after the end of the month of purchase, yet the money often sits in trust for months. The gap is usually bridged by a CRA comfort letter that lets the buyer keep holding the funds while your file is open; the CBA/CPA Canada letter asks CRA to generate these automatically. Whatever the buyer does remit counts as tax paid on your behalf, and you recover any overpayment through your Canadian return.
Your side of the deal has its own deadline. Subsection 116(3) requires a non-resident seller to notify CRA no later than 10 days after the sale. CRA's section 116 page puts the late-filing penalty at $25 a day, with a minimum of $100 and a maximum of $2,500. You can also notify CRA before the sale under subsection 116(1), which is often smarter: once a deal is firm, you have the buyer's name and the price, and the clock on CRA's queue starts earlier.
To get the certificate, you either pay CRA an amount on account of your tax or post security CRA accepts. For capital property that payment is set by subsection 116(4): 25% of the amount by which the proceeds exceed your adjusted cost base (ACB). That's 25% of the gain, not of the price, which is the whole reason the certificate matters.
T2062 vs T2062A: which form, which holdback
A condo or house you own as an investment or a former home is capital property. The land under it is too. But the building portion of a rental is depreciable property, because you were entitled to claim capital cost allowance (CCA) on it, and section 116 treats depreciable property more harshly: the buyer's liability is 50% under subsection 116(5.3), not 25%.
| T2062 | T2062A | |
|---|---|---|
| Covers | Capital property: land, a home never rented, the land part of a rental | Depreciable property (rental building), and real property that isn't capital property |
| Buyer's liability without a certificate | 25% of the price | 50% of the price |
| Your payment to get the certificate | 25% of proceeds minus ACB | An amount CRA accepts; per CRA's circular, 25% of the gain plus federal tax on any CCA recapture |
| Certificate CRA issues | T2068 (after sale) or T2064 (before) | T2068 or T2064 |
Source: ITA s. 116(4), (5), (5.2), (5.3); CRA: Disposing of or acquiring certain Canadian property; CRA IC72-17R6, paras. 15, 41, 43.
For a rental condo, that usually means filing both forms: the land and the gain go on T2062, and the building and any recapture go on T2062A. CRA's circular IC72-17R6 says two certificates may be issued. The building/land split matters a lot here, because every dollar allocated to the building is held back at double the rate. Your accountant will want a split you can defend.
The holdback at today's asking prices
To put real numbers on it, here's 25% of the median asking price for condos across Metro Vancouver, from EstateBlock's live listings on 2026-10-18. These are asking prices of active listings, not sale prices, so treat them as a rough guide to what a seller is listing at today.
Source: EstateBlock.com live listings, snapshot 2026-10-18. Median asking prices of active listings, not sale prices. Holdback = 25% of that price.
Show the numbers
| Item | Value |
|---|---|
| West Vancouver | $338K |
| North Vancouver | $200K |
| Vancouver | $200K |
| Burnaby | $172K |
| Richmond | $171K |
| Coquitlam | $157K |
| Langley | $125K |
| Surrey | $125K |
| City | Median ask | 25% |
|---|---|---|
| Vancouver | $2.75M | $688K |
| West Vancouver | $3.80M | $950K |
| North Vancouver | $2.26M | $565K |
| Richmond | $2.28M | $570K |
| Burnaby | $2.10M | $525K |
| Coquitlam | $1.80M | $450K |
| Surrey | $1.60M | $400K |
| Langley | $1.83M | $457K |
Source: EstateBlock.com live listings, snapshot 2026-10-18. Median asking prices of active listings, not sale prices. Holdback = 25% of that price.
A typical City of Vancouver condo listed at $799K means about $199,700 in trust. A median-asking West Vancouver house at $3.80M puts roughly $949,600 on hold. None of it is yours to use until CRA finishes the file.
Worked example: a $1.2M Vancouver condo
This is a hypothetical, built to show the mechanics. Say you bought a Vancouver condo in September 2016 for $877,000, while you lived in Canada. That price is backed out of the Greater Vancouver apartment benchmark (+36.8% over ten years), so a $1,200,000 unit today would have cost about that much then. You never lived in it. You moved abroad, kept it rented, and never claimed CCA. Now you're a non-resident and you sell it for $1,200,000.
| Item | Amount |
|---|---|
| Purchase price (2016) | $877,000 |
| + PTT paid on purchase | $15,540 |
| + Legal fees on purchase (assumed) | $1,500 |
| = Adjusted cost base | $894,040 |
| Sale price (2026) | $1,200,000 |
| − Selling costs: commission, GST, legal (assumed) | $35,000 |
| = Capital gain | $270,960 |
| Taxable half | $135,480 |
Source: PTT at the general rates (1% on the first $200,000, 2% up to $2 million), Government of B.C.; cost base and selling costs per CRA T4037; inclusion rate ITA s. 38. Hypothetical figures.
Now the section 116 side. Assume 30% of the price is the building and 70% is land (an assumption; your own split will differ). The buyer's lawyer looks at it this way:
- Land portion, $840,000, at 25%: $210,000
- Building portion, $360,000, at 50%: $180,000
- Total held back: $390,000, or 32.5% of the price
If the same condo had never been rented (say a family member used it rent-free), it would be all capital property and the holdback would be $300,000.
To get the certificates, you'd pay CRA 25% of the proceeds over your ACB: 25% of $305,960, or $76,490. With no CCA claimed there's no recapture to add. Note that this payment is calculated before selling costs, so it's higher than 25% of your actual gain.
Source: ITA s. 116; CRA 2026 federal brackets; ITA s. 120(1) surtax. Estimate: no credits, no other Canadian income.
Show the numbers
| Item | Value |
|---|---|
| Buyer's holdback, rental | $390K |
| Holdback if never rented | $300K |
| Paid to CRA for certificate | $76K |
| Estimated final tax | $37K |
The tax you actually owe
The certificate payment is a down payment on your tax, not the final number. The real bill comes from your Canadian return for the year of sale, which CRA says you have to file to report the disposition, with the gain on Schedule 3. CRA's section 116 page sets the due date for individuals at April 30 of the following year and asks you to attach copy 2 of the certificate.
Two things make a non-resident's math different from a BC resident's:
- No BC income tax on the gain, but a federal surtax instead. For a full-year non-resident, Income Tax Regulation 2602 counts only employment and business income as "earned in a province". A capital gain isn't either, so section 120(1) adds a surtax of 48% of the federal tax on that income.
- Half the gain is taxable, the same as for residents. The inclusion rate is still one half in 2026.
In the example, the taxable half is $135,480. At the 2026 federal brackets, federal tax on that comes to about $25,000. Add the 48% surtax ($12,000) and the total is about $37,000. That assumes no other Canadian income and no credits, so treat it as a rough estimate; your accountant will run the real return.
| Step | Amount |
|---|---|
| Taxable capital gain | $135,480 |
| Federal tax, 2026 brackets | $25,000 |
| + Non-resident surtax (48%) | $12,000 |
| = Estimated tax on the sale | $37,000 |
| Paid to CRA for the certificate | $76,490 |
| = Estimated refund after you file | $39,500 |
Source: CRA: 2026 federal tax rates and brackets; ITA s. 120(1); Income Tax Regulations s. 2602. Estimate; ignores credits, other income and treaty relief in your home country.
So in this example: $390,000 held back, $76,490 paid to get it released, about $37,000 actually owed. The difference of roughly $39,500 comes back as a refund, after CRA assesses your return. Your country of residence may also tax the gain and give a credit for the Canadian tax. That's a question for an accountant in that country.
Timeline and cash flow
Here's how the money moves for the hypothetical seller. The dates around the sale come from the Act; the certificate date is the unknown.
| When | What happens | Cash to you |
|---|---|---|
| Once the deal is firm | File T2062 (and T2062A for a rental); s. 116(1) and (5.2) allow filing before completion | |
| Completion day | Buyer's lawyer holds back $390,000 | $775,000 (after $35,000 costs, no mortgage) |
| Within 10 days of completion | Deadline to notify CRA if you didn't file in advance | |
| CRA review | You pay $76,490 or post security; CRA may question your ACB or value | −$76,490 |
| Certificate issued | Lawyer releases the holdback | +$390,000 |
| By April 30 the next year | File your Canadian return with Schedule 3 and the certificate | |
| After assessment | Refund of the overpayment | about +$39,500 |
Source: ITA s. 116(1), (3), (4), (5), (5.2); CRA section 116 page; CBA/CPA Canada letter to CRA, Jan 24, 2025. Hypothetical amounts.
Watch the mortgage. The holdback is calculated on the gross price, not on your equity. If the same condo had an $800,000 mortgage, the payout plus $35,000 of costs would leave $365,000 of proceeds, which is $25,000 less than the $390,000 holdback. Somebody has to find that money on completion day. Raise it with your lawyer when you list, not the week before closing; the BC closing costs breakdown covers the buyer's side of the same statement.
Two things slow certificates down. CRA's own page warns that missing documents delay the certificate, and its circular says CRA may hold the certificate if the ACB doesn't match what you reported, and that real estate appraisals can take several months. Have the 2016 purchase statement, PTT form and improvement receipts scanned before you file. CRA's section 116 page accepts filings through the "Submit documents" service in My Account or Represent a Client, by fax, or by mail to the regional Section 116 Centre of Expertise.
Principal residence exemption for non-residents
If you lived in the home before you left Canada, part of the gain may still be tax-free. The catch is that the exemption only counts years you were resident in Canada. CRA's principal residence folio, applying ITA s. 40(2)(b), uses this formula: the exempt share is (1 + years it was your principal residence while you were resident) divided by the years you owned it. The "+1" only applies if you were resident in the year you bought.
Take the same hypothetical condo, but this time you lived in it from 2016 through 2020, moved abroad at the end of 2020, a family member lived there rent-free after that, and you sold in 2026. (If you rented it out instead, CRA treats the switch as a change in use, a deemed sale at market value, and the math changes. That's a conversation for your accountant.)
| Piece of the formula | Value |
|---|---|
| Years designated while resident (2016 to 2020) | 5 |
| +1 (resident in the year of purchase) | 1 |
| Tax years owned (2016 to 2026) | 11 |
| Exempt share | 6/11 = 54.5% |
| Exempt part of the gain | $147,796 |
| Taxable gain left (half is taxed) | $123,164 |
Source: CRA Income Tax Folio S1-F3-C2, Principal Residence; CRA T4058. Hypothetical gain from the example above.
You still file the T2062, and you support the exemption claim with Form T2091(IND), as CRA's circular (para. 73) describes. The buyer's lawyer will still hold back 25% of the price until the certificate arrives, even if you expect most of the gain to be exempt. The principal residence exemption guide covers the designation rules in more detail.
Rental income while you own it
If the place is rented while you're abroad, a separate withholding applies every month. CRA's T4144 guide says your agent, usually the property manager, must withhold 25% of the gross rent and remit it by the 15th of the next month. You can cut that to tax on net rent by filing Form NR6 on or before January 1 (or before the first rent payment) and then a section 216 return. With an approved NR6, the 2025 return was due June 30, 2026.
If you claimed CCA on the building over the years, the sale also brings recapture, which is fully taxable. That's the reason for the 50% holdback on the building portion, and it's why I'd tell any non-resident landlord to ask their accountant whether CCA is worth claiming at all if a sale is a few years out. The capital gains tax guide walks through recapture with Vancouver numbers, and the capital gains calculator runs your own figures.
BC-specific costs: SVT, flipping tax, UHT
Speculation and vacancy tax. If you own in a taxable area (all of Metro Vancouver's main cities are in) and the place isn't rented out, BC's SVT applies. The 2026 rate is 3% of assessed value for foreign owners and untaxed worldwide earners, and BC has scheduled 4% from the 2027 tax year. A tenant living there at least six months of the year is the usual exemption. On a $1.2 million assessment, 3% is $36,000 a year. The SVT calculator runs your own figures.
Short holds. Non-residents aren't exempt from the BC home flipping tax (sales within 730 days) or the federal flipping rule (365 days). If you bought recently, check those dates before you list.
Underused Housing Tax. The federal 1% UHT is gone from the 2025 calendar year on, but 2022 to 2024 obligations, penalties and interest remain. The 2026 amending Act confirms no UHT and no return for 2025 and later. CRA's section 116 page says it may refuse a clearance certificate on residential property if an affected owner hasn't met their UHT filing and payment obligations. Canadian citizens and permanent residents living abroad were generally excluded owners, so this mostly matters to owners who were required to file UHT returns for 2022 to 2024. If that's you and you skipped them, fix them before you sell.
The foreign buyer ban restricts who can buy, not who can sell. A non-resident can sell freely; the buyer is the one who has to qualify.
My read
The tax isn't what catches non-resident sellers off guard. It's the cash flow. In the example, the seller owes something like $37,000 but walks away from completion without $390,000 for what could be many months.
What I'd do, in order:
- Hire a Canadian accountant who files section 116 notices regularly before you list, not after the offer.
- Pull together the ACB file: purchase statement, PTT, legal fees, receipts for improvements, and any CCA claimed.
- Work out the land/building split and the holdback on your expected price, then compare it with your mortgage payout.
- File the T2062 (and T2062A for a rental) as soon as the deal is firm, so CRA's clock starts before completion.
- Price the home on today's numbers. Our home value estimator is a start, and the Vancouver listings on EstateBlock show what your competition is asking.
This is general information, not tax or legal advice. Section 116 files depend on your residency, treaty status and history with the property, so confirm your situation with an accountant and a lawyer before you sign a listing agreement.
FAQ
How much does a buyer hold back when a non-resident sells property in Canada?
25% of the purchase price for capital property such as land or a home that was never rented, and 50% for depreciable property such as the building portion of a rental, unless CRA has issued a section 116 certificate. The buyer can withhold it from the price and must remit it within 30 days after the end of the month of purchase.
What is a section 116 clearance certificate?
It's the certificate of compliance CRA issues once a non-resident seller has notified it of the sale (Form T2062 or T2062A) and paid an amount on account of tax or posted security. For capital property the payment is 25% of the proceeds over the adjusted cost base. With the certificate, the buyer's lawyer can release the holdback.
When does a non-resident have to notify CRA of a property sale?
No later than 10 days after the sale under subsection 116(3), unless notice was given before the sale under subsection 116(1). The late-filing penalty is $25 a day, with a minimum of $100 and a maximum of $2,500.
Do non-residents pay BC income tax on the capital gain?
Not for a full-year non-resident whose only Canadian income is the gain. Regulation 2602 counts only employment and business income as earned in a province, so section 120(1) applies a federal surtax of 48% of federal tax instead. Half the gain is taxable.
Can a non-resident claim the principal residence exemption?
Only for years they were resident in Canada. The exempt share is (1 + years designated while resident) divided by years owned, and the +1 applies only if the owner was resident in the year of purchase.
Sources
- Income Tax Act s. 116: dispositions by non-resident persons (Justice Laws)
- Income Tax Act s. 120: non-resident surtax (Justice Laws)
- Income Tax Regulations s. 2602: income earned in a province by non-residents (Justice Laws)
- Income Tax Act s. 38: taxable capital gain is one half (Justice Laws)
- CRA: Disposing of or acquiring certain Canadian property (section 116)
- CRA: IC72-17R6, Procedures concerning the disposition of taxable Canadian property by non-residents
- CRA: T4058 Non-Residents and Income Tax 2025
- CRA: T4144 Income Tax Guide for Electing Under Section 216 (2025)
- CRA: Tax rates and income brackets for individuals, 2026
- CRA: T4037 Capital Gains 2025
- CRA: Income Tax Folio S1-F3-C2, Principal Residence
- CRA: Residential property flipping rule
- CRA: Excise and GST/HST News No. 121 (Underused Housing Tax eliminated from 2025)
- Budget 2025 Implementation Act, No. 1, S.C. 2026, c. 3, ss. 167-168 (Justice Laws)
- Income Tax Act s. 40(2)(b): principal residence exemption formula (Justice Laws)
- CBA/CPA Canada Joint Committee on Taxation: letter to CRA on section 116 (Jan 24, 2025)
- Government of B.C.: Speculation and vacancy tax rates
- Government of B.C.: SVT exemptions for individuals
- Government of B.C.: BC home flipping tax
- Government of B.C.: Property transfer tax
- Greater Vancouver Realtors: September 2026 stats package (MLS® HPI)
- EstateBlock.com live listings, snapshot 2026-10-18 (asking prices of active listings)
Dan Marusin PREC, REALTOR® · Renanza Realty Inc., 777 Hornby St, Suite 600, Vancouver, BC. This article is general information, not legal, tax or financial advice.