Under Canadian tax law, anyone earning income in Canada must pay Canadian income tax.
Tax residents must report and pay tax on worldwide income,
while non-residents only report and pay tax on Canadian-sourced income.

Therefore, determining whether you are a tax resident
or non-resident for tax purposes is extremely important.
The key criterion is whether your family and personal ties (family tie)
— your main home, spouse, and dependents — are primarily based in Canada.
This has nothing to do with immigration status
(permanent resident, citizen, or foreign visitor).

Because each case is different, we strongly recommend consulting a
professional Chartered Professional Accountant (CPA)
to determine your tax residency status accurately.

Since non-residents live outside Canada, the CRA requires that
when a non-resident sells Canadian real estate,
the closing lawyer must withhold 25% of the gross sale price
as a reserve for potential taxes.
Yes — that’s 25% of the selling price, not the gain.
This is to ensure that the CRA can collect taxes before the seller
leaves Canada with the sale proceeds.

If the non-resident seller fails to pay the required tax,
the CRA has the authority to require the buyer
to pay the outstanding amount on the seller’s behalf.
Therefore, during the sale of a non-resident’s property,
it’s critical that the seller provide a
Certificate of Compliance to show that
all tax obligations have been settled.

A non-resident seller can apply for the T2062 Certificate of Compliance
either after receiving a confirmed offer
or within 10 days after the completion date.
Late applications incur penalties — $25 per day, up to a maximum of $2,500.

If the seller does not already have a Canadian tax number,
they must also submit form T1261
along with certified copies of their passport ID and Canadian visa pages
to obtain an Individual Tax Number (ITN).

When applying for the clearance certificate,
the tax is calculated only on the capital gain portion
(sale price minus purchase price), multiplied by 25%.
Supporting documents such as the purchase agreement, sale agreement,
or confirmed offer must be attached.

Please note that at this stage, additional selling costs
such as realtor commissions and legal fees cannot yet be deducted.

The CRA’s review process usually takes 4–6 months.
Once processed, the CRA will send a tax remittance voucher.
The seller’s lawyer then uses the withheld funds to pay the calculated tax.
After the CRA receives payment, a T2068 Certificate of Compliance
is issued within about 3–4 weeks, and any excess funds
are returned to the seller.

The following year, the non-resident must file a
non-resident individual tax return to
report the final capital gain from the property sale.
This time, they can deduct selling expenses such as
commissions and legal fees, and calculate tax on their net gain.
The final tax owed is usually less than the amount already withheld,
and the difference is refunded by the CRA.
This process typically takes another 6–8 months to complete.

Example:
Mr. Wang, a non-resident, sells his property in Vancouver for $4,000,000.
The lawyer withholds 25% of the sale price — $1,000,000 — in trust.

Mr. Wang submits a T2062 application either after receiving the confirmed offer
or within 10 days after completion.
If his purchase price was $3,000,000,
the taxable capital gain is $1,000,000 ($4M − $3M).
The required prepayment is 25% of that gain, or $250,000.

Once the CRA processes the clearance,
the lawyer pays $250,000 in tax and refunds the remaining $750,000 to Mr. Wang.
In the following year, after deducting realtor commissions and legal fees,
the actual tax due (based on net gain) is lower than $250,000.
Mr. Wang then receives a refund for the overpaid tax from the CRA.

Because this entire process — from withholding to compliance certificate to refund —
is lengthy and complex,
most sellers hire an experienced accounting firm to handle it on their behalf.
If you need assistance, please contact us.
Our team at Jiayue Tax & Financial Planning will be happy to help.