Non-resident ‘s disposition of Taxable Canadian Property - residential property, land, etc.

When a non-resident disposes of "Taxable Canadian Property" (TCP)—such as a house, condo, or vacant land—they are subject to a rigorous tax withholding and reporting regime.¹ In Quebec, this process is doubled, requiring compliance with both federal (CRA) and provincial (Revenu Québec) authorities.

Failure to follow these steps can lead to the "freezing" of up to 50% of the sale proceeds in a lawyer’s trust account for several months.

Federal Compliance: ITA Section 116

Under Section 116 of the Income Tax Act, the CRA uses a withholding mechanism to ensure non-residents pay capital gains tax.

• The Withholding Trap: By default, a purchaser is legally required to withhold 25% (often increasing to 35% in 2025 depending on property type) of the gross purchase price and remit it to the CRA. For a $1,000,000 sale, this means $250,000–$350,000 is held back, regardless of your actual profit.
• The Certificate of Compliance (Form T2062): To avoid withholding on the gross price, the vendor can apply for a Certificate of Compliance. This allows the tax to be calculated on the estimated capital gain (selling price minus cost) rather than the total sale price.
• Strict Deadlines: You must notify the CRA of the disposition no later than 10 days after the closing date. Late filing triggers a penalty of $25 per day, up to a maximum of $2,500.

Quebec Compliance: Loi sur l'impôt 

If the property is in Quebec, the vendor must also satisfy the requirements of the Quebec Taxation Act. These sections mirror the federal rules but apply specifically to provincial tax.

• Section 1097 (Optional Notice): A vendor can file a notice of a proposed disposition before the sale closes.
• Section 1099 (Compulsory Notice): This is the mandatory filing requirement. Like the federal rule, a notice must be sent to Revenu Québec within 10 days of the sale using Form TP-1097-V.
• Provincial Withholding: In Quebec, the provincial withholding rate is typically 12.875% of the gross proceeds. Combined with federal withholding, a non-resident could see nearly 40-50% of their total sale price withheld if certificates are not obtained.
• Penalties: Quebec also imposes a late-filing penalty of $25 per day, capped at $2,500, for failing to submit the notice within the 10-day window.

The Process briefly

Critical Strategy for Non-Residents

Because the CRA and Revenu Québec can take 3 to 6 months to issue certificates, the funds are usually held in a notary’s trust account. To speed this up, many professionals recommend filing for the certificates as soon as a firm offer is signed (proposed disposition), rather than waiting until after the closing date.

Finally, obtaining these certificates is not a tax return. Even after receiving them, the non-resident must file a formal Canadian and Quebec income tax return by April 30 of the following year to claim any expenses (like commissions or legal fees) and potentially recover a portion of the tax paid.