What is a section 116 certificate and why might it matter when a non-resident inherits Ontario real estate?

The "section 116" concept refers to a federal Income Tax Act process that applies when a non-resident of Canada disposes of certain taxable Canadian property, including real estate. It's designed to make sure the CRA collects any tax owed on the disposition before the proceeds leave the country. It can become relevant in an estate context when Ontario real property passes to, or is later sold by, a non-resident beneficiary, because the disposition rules that normally apply to a non-resident seller can be triggered.

In broad terms, the process is meant to result in a certificate confirming CRA's position on the disposition, with a portion of proceeds withheld in the meantime as security pending that clearance. The exact percentage withheld and the procedural mechanics are set by the CRA and can change, so this content won't state a specific figure - a cross-border tax advisor should confirm the current requirements for the specific transaction.

Because this rule sits in federal tax law, separate from Ontario's estate and probate rules, an estate trustee dealing with a non-resident beneficiary inheriting Ontario real estate should loop in a tax professional early, ideally before any sale or transfer of the property is finalized, to avoid unexpected withholding surprises.