- A non-resident who sells taxable Canadian property, such as Ontario real estate, must notify the CRA on Form T2062 within 10 days of the sale.
- If no certificate of compliance has been issued, the buyer may become liable for the seller's tax, which is why buyers hold back part of the proceeds.
- The notice and compliance certificate process for non-resident sellers is a different rule from the Non-Resident Speculation Tax, which applies to foreign nationals, foreign corporations and taxable trustees who buy residential property in Ontario.
Most Ontario sales close without the buyer thinking about the seller's tax. That changes when the seller lives outside Canada. Federal tax rules can then put a real financial risk on the person buying the property.
This article explains the CRA process, why buyers often hold back part of the sale proceeds, and how this differs from the tax that non-resident buyers pay. It does not cover how an agreement of purchase and sale words adjustments or holdbacks. Your lawyer can explain that part of your own contract.
What the seller must tell the CRA
A non-resident who sells taxable Canadian property, such as Ontario real estate, must notify the CRA on Form T2062 within 10 days of the sale.
Late notice carries a penalty of $25 a day, with a minimum of $100 and a maximum of $2,500.
The certificate of compliance (T2068)
The CRA issues a certificate of compliance, Form T2068, once the seller provides payment or acceptable security.
In plain terms, the certificate is the CRA's signal that the seller's tax on the sale has been dealt with. That matters most to the buyer, as the next section explains.
Why the buyer can be on the hook
If no certificate of compliance has been issued, the buyer from a non-resident seller may become liable for the seller's tax under Income Tax Act, s. 116(5).
To protect against that, the buyer can hold back 25% of the proceeds, or 50% for certain property types, less any certificate limit.
| Situation | What it means for the buyer |
|---|---|
| No certificate issued | The buyer may become liable for the seller's tax, so a holdback of 25% (50% for certain property types) is available |
| Certificate has a limit | The holdback is reduced by that limit |
| Certificate issued after payment or security | The CRA has confirmed the seller provided payment or acceptable security |
Which property types fall under the 50% rate, and how any certificate limit works on your file, are questions for your lawyer or accountant.
How this differs from the Non-Resident Speculation Tax
People often mix up the section 116 holdback with the Non-Resident Speculation Tax (NRST). They are separate. The NRST is 25% of the value of the consideration and applies to residential property anywhere in Ontario bought by foreign nationals, foreign corporations and taxable trustees. It is charged in addition to Ontario land transfer tax.
- Section 116 is about the seller being a non-resident and the tax on the seller's sale.
- The NRST is about the buyer being a foreign national, foreign corporation or taxable trustee.
- A foreign national, for NRST, is an individual who is not a Canadian citizen or permanent resident of Canada.
What to do next
If the seller lives outside Canada, raise it with your lawyer as early as possible. Closing funds are not moved in cash. A lawyer or paralegal in Ontario may not accept more than $7,500 in cash for any one client file, including on a purchase or sale of real property. In practice, closing funds are delivered by non-cash methods.
- Tell your lawyer early that the seller is, or may be, a non-resident.
- Sellers: ask about filing Form T2062 within 10 days of the sale.
- Ask whether a certificate of compliance has been issued and whether it has a limit.
- Buyers: ask whether a holdback is needed if there is no certificate.
- Confirm with a lawyer or accountant how the rules apply to your property type.
Frequently asked questions
Who files Form T2062?
The non-resident seller must notify the CRA on Form T2062 within 10 days of the sale. Late notice carries a penalty of $25 a day, with a $100 minimum and a $2,500 maximum.
What is a certificate of compliance?
It is Form T2068, which the CRA issues once the seller provides payment or acceptable security. Without one, the buyer may become liable for the seller's tax.
How much can a buyer hold back?
The buyer can hold back 25% of the proceeds, or 50% for certain property types, less any certificate limit. Your lawyer can confirm which rate applies to your property.
Is the holdback the same as the Non-Resident Speculation Tax?
No. The NRST is paid by foreign national, foreign corporation and taxable trustee buyers of Ontario residential property, and it is charged on top of land transfer tax. The section 116 holdback relates to a non-resident seller's tax.
Sources
- Ontario Ministry of Finance – Non-Resident Speculation Tax — ontario.ca
- Law Society of Ontario – By-Law 9 — lso.ca
- CRA – Disposing of or acquiring certain Canadian property — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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