Thinking of Selling Your Canadian Property in 2026? Non-Residents Face a Tax Process That Must Begin Before Closing

Why 25% is withheld — and what it is for

Under Section 116 of the Income Tax Act, when a non-resident sells taxable Canadian property, the buyer is legally required to withhold 25% of the gross sale proceeds and remit them to the Canada Revenue Agency — unless the seller has obtained a clearance certificate before or on the date of closing. The withholding exists because Canada cannot easily collect tax from a non-resident after they leave the country. The 25% is held as security against the tax that may be owing on any capital gain from the sale.

The withheld amount is not the final tax. After filing a Canadian non-resident tax return and calculating the actual capital gains tax owing, CRA refunds the difference. But the process takes months — and the money is inaccessible in the meantime. For a non-resident who needs the proceeds from the sale, the withholding creates a significant cash flow problem that is entirely avoidable with proper advance planning.

The T2062 clearance certificate — what it is and when to apply

To avoid the 25% withholding, the seller must obtain a Certificate of Compliance (commonly called a T2062 clearance certificate) from CRA before or on the closing date. The T2062 application requires: a description of the property being sold, the sale price and the adjusted cost base (ACB) of the property, supporting documentation for the ACB calculation (original purchase price, legal fees, capital improvements), the proposed closing date, and the non-resident seller's Canadian tax identification number (SIN, ITN, or BN).

Once CRA receives the application and is satisfied with the information provided, it issues a clearance certificate confirming that the tax on the gain has been secured. The buyer can then complete the transaction without withholding. CRA's processing time for T2062 applications currently ranges from 6 to 12 weeks. This means the application must be submitted well before the anticipated closing date — ideally at the same time as or shortly after signing the Agreement of Purchase and Sale.

What happens if you miss the T2062 deadline

If the clearance certificate is not obtained before closing, the buyer's lawyer is legally required to withhold 25% of the gross proceeds and remit it to CRA within 30 days. The seller then receives only 75% of the sale price on closing. To recover the withheld amount, the non-resident seller must: file a Section 116 non-resident disposition return with CRA, calculate the actual capital gains tax owing on the sale, and wait for CRA to process the return and issue a refund of the excess withholding. This process typically takes 6 to 18 months after the filing date. In a falling market, locking up 25% of your proceeds for over a year while you wait for a refund is a significant cost — one that proper advance planning eliminates entirely.

Calculating your capital gain — and what it actually costs

Capital gains on the sale of Canadian property by a non-resident are calculated as: Sale price minus selling costs (real estate commission, legal fees) minus adjusted cost base (ACB). The ACB for a non-resident is typically the original purchase price plus eligible capital improvements.

For non-residents who purchased at the peak of the market (2021–2022) and are selling now at a loss, there may be no capital gain and therefore no Canadian tax owing on the gain. However, the T2062 process is still required — it is the mechanism by which CRA confirms this. Filing the T2062 with documentation showing no gain (or a loss) typically results in CRA issuing a nil-withholding certificate, allowing the sale to proceed without any holdback.

Non-residents selling at a loss should not assume the clearance certificate process does not apply to them. The obligation to file T2062 exists regardless of whether a gain is expected.

Rental income obligations before the sale

Many non-residents who are selling in 2026 have been renting their Canadian property while holding it. If rental income was received but not properly reported under Part XIII of the Income Tax Act, outstanding obligations may affect the sale. Under the standard Part XIII rules, 25% withholding applies to gross rental payments made to a non-resident. If the property manager or tenant did not withhold and remit this tax, the non-resident owner is responsible.

CRA will confirm that all outstanding obligations — including any unremitted rental withholding — are settled before issuing the T2062. Addressing rental income compliance before initiating the T2062 application avoids delays in the clearance process.

Frequently asked questions

I bought a Toronto condo in 2021 for $750,000 and it is now worth $550,000. I am a non-resident. Do I still need to file T2062?

Yes. The T2062 process applies to all non-resident dispositions of taxable Canadian property, regardless of whether a gain is expected. In your case, you are selling at a loss. If you document the ACB correctly and the selling costs, CRA should issue a nil-withholding certificate confirming no tax is owing. Without the certificate, the buyer's lawyer must withhold $137,500 (25% of $550,000) at closing regardless of the loss. Filing T2062 early — with documentation of your original purchase price and any capital improvements — is the correct approach.

How long does the T2062 process take?

CRA's current processing time is 6 to 12 weeks from the date of a complete application. Incomplete applications restart the clock. You should submit the T2062 application as soon as possible after signing the Agreement of Purchase and Sale — do not wait until a few weeks before closing.

I am a non-resident and I have been renting my Canadian property through a property management company. The company has been remitting rental taxes. Does this affect my T2062?

If your property manager has been withholding and remitting 25% of gross rents to CRA under Part XIII, your rental obligations are likely current. You should obtain confirmation from the property manager that remittances are up to date before initiating the T2062 application. CRA will review rental history as part of the clearance process.

I became a Canadian tax resident several years ago but still own property from before. Am I a non-resident for T2062 purposes?

No. If you are currently a Canadian tax resident, Section 116 and the T2062 process do not apply to you. You would sell the property as a Canadian resident and report any capital gain on your Canadian tax return in the normal way. The non-resident withholding rules apply only to individuals who are non-residents of Canada at the time of sale.