If you're a non-resident of Canada selling real estate in Toronto, the purchaser is required to withhold 25% of your gross sale price under Section 116 of the Income Tax Act, not the 35% still cited on a lot of tax and legal websites. That 35% figure came from a 2024 budget proposal tied to a capital gains inclusion rate hike, and it was cancelled in March 2025. You can also apply for a CRA Certificate of Compliance to shrink that holdback down to 25% of your net capital gain instead of the full sale price, and you have 10 days after closing to notify CRA or you'll face a penalty on top of everything else.
If you're selling a condo in King West or a house in Rosedale from outside Canada, your lawyer is going to tell you something that sounds alarming: a quarter of your sale price is about to get held back at closing. You're not being scammed. This is federal tax law, and it catches non-resident sellers off guard constantly, especially in a market like Toronto's downtown core and luxury north end, where a meaningful share of owners live abroad or split their time between countries.
Here's what makes this worse: if you go looking for answers online, a lot of what you'll find is wrong. Several accounting and law firm blogs are still quoting a 35% withholding rate that was proposed for 2025 and then formally cancelled by the federal government in March of that year. The correct number for 2026 is 25% of your gross sale price for typical residential property, and there's a legitimate way to bring that down before your money ever gets held back in the first place.
Section 116 of the Income Tax Act exists because CRA has a hard time collecting tax from someone who no longer lives in Canada. Once you're gone, chasing you down for capital gains tax owed on a Toronto property sale gets complicated. So the law shifts the burden to whoever buys from you.
Here's how it works in practice:
This is one of the most common questions I get from clients who bought a Toronto condo years ago, moved abroad for work, and are now trying to sell. They're not trying to avoid tax. They're trying to understand why a quarter of their equity is sitting with CRA instead of in their bank account the week of closing.
You don't have to accept 25% of your full sale price sitting in limbo. CRA allows you to apply for a Certificate of Compliance using Form T2062 (or T2062A if the property was a rental), and once that certificate is approved, the withholding drops to 25% of your net capital gain rather than 25% of the entire sale price.
For anyone who bought years ago and has real equity built up, this distinction matters. On a $2 million King West condo purchased for $1.2 million, withholding on the full sale price means roughly $500,000 held back. Withholding on the net gain instead means roughly $200,000 held back (25% of the $800,000 gain), which is a materially smaller number and a much better outcome for your cash flow at closing.
A few things to know before you count on this working smoothly:
If you're weighing whether to sell now or wait, this is exactly the kind of number that changes the math, and it's worth running before you list, not after you've already accepted an offer.
Separate from the certificate application, you're required to notify CRA of the disposition within 10 days of closing. Miss that window and you're looking at a penalty of $25 per day, with a minimum of $100 and a maximum of $2,500. It's not the biggest number in this whole process, but it's an entirely avoidable one, and it's the kind of deadline that slips past sellers who are juggling a move, a currency exchange, and a closing all at once.
If your Toronto condo or home has been tenanted while you've been living abroad, and a lot of non-resident-owned units in the downtown core are, factor that into your timeline too. Vacant possession, notice periods, and closing dates all need to line up, and none of that changes because you're filing paperwork from another country.
Selling from outside Canada isn't a reason to avoid the market, but it is a reason to work with people who've actually done this before. Your agent should be comfortable coordinating with your lawyer and accountant on timing, not just listing the property and hoping the tax side sorts itself out. If you're weighing what to look for in a listing agent for this kind of sale, our guide to choosing a top Toronto listing agent and the specific qualities worth prioritizing cover what separates an agent who can handle a straightforward local sale from one who can handle yours.
Toronto's downtown core and luxury north end also see steady interest from international buyers and capital, which is part of why non-resident ownership concentrates so heavily in exactly these neighborhoods. If you want the broader context on why international money keeps flowing into this city, we've written about what's driving that demand.
None of this is tax or legal advice. Section 116 calculations, the principal residence exemption, and certificate timelines depend on your specific residency history and property use, so confirm your numbers with a cross-border accountant and a real estate lawyer before you list.
The 25% held at closing is a deposit against tax owed, not your final bill. If you apply for a Certificate of Compliance before closing, the holdback drops to 25% of your net capital gain instead of the full sale price. If you don't file for the certificate in time, you'll still get back any excess once you file your Canadian tax return.
CRA quotes 4 to 8 weeks, but delays of several months have been common during backlog periods. Apply as soon as you have a firm sale price, and ask your lawyer about closing on a CRA comfort letter if the certificate hasn't come through by closing day.
You'll owe a penalty of $25 per day the notification is late, with a minimum of $100 and a maximum of $2,500. This is separate from the withholding tax itself, and it's entirely avoidable with early planning.
Generally, yes, for the years you actually lived in the property as your principal residence, even if you're a non-resident now. The exemption doesn't cover years the property was a rental or vacant investment. Confirm the exact calculation with your accountant based on your ownership timeline.
Yes. A Canadian real estate lawyer can act under Power of Attorney to sign closing documents on your behalf, and most of the process, from listing to offer review, can be handled remotely with your agent.
If you're thinking through this for your own situation, I'm happy to walk you through the numbers. Reach out anytime at ryan@connect.ca, or send your details through this from and we'll get back to you.
About Ryan Coyle
Ryan Coyle is a Toronto real estate broker and investor with more than 20 years in the industry and over $2 billion in real estate transactions. He personally holds a portfolio of 40+ doors and helps buyers, sellers, and investors build long-term wealth through Toronto real estate. Ryan leads Connect, a full-service GTA brokerage focused on the downtown core and north Toronto's luxury market. Learn more at connect.ca.
