If I sell my Ontario property while living abroad, why does my lawyer have to withhold part of the price for the CRA?

This comes from a federal rule under the Income Tax Act aimed at making sure non-residents pay Canadian tax on the sale of Canadian real property, since the Canada Revenue Agency has a much harder time collecting from someone who has already left the country. To manage that risk, the purchaser is generally required to withhold a specified portion of the purchase price and remit it toward your tax liability, unless you have obtained a clearance certificate from the CRA confirming your tax obligations on the sale have been addressed.

Your lawyer manages this because the withholding obligation actually falls on the buyer, and a buyer who fails to withhold when required can become personally liable for the amount that should have been held back. That is why a non-resident seller is generally encouraged to apply for a clearance certificate as early as possible, ideally before closing, so the withholding can be based on the smaller, certificate-adjusted amount rather than the full purchase price.

Speak with your lawyer and a tax advisor early in the sale process about applying for a clearance certificate, since delays here can affect your closing.