ImmoMulti — a direct buyer of income properties on the North Shore — regularly works with owners who live abroad. If you are a non-resident of Canada selling your plex, one rule often catches sellers off guard: the buyer is legally required to withhold part of the price — 25%, sometimes 50% — and remit it to the tax authorities, unless you give them a certificate of compliance from the Canada Revenue Agency (CRA) and Revenu Québec. This section 116 mechanism of the Income Tax Act exists to guarantee the tax on your gain is paid before the funds leave the country. Anticipated properly, it isn't a deal-breaker; handled poorly, it can lock up tens of thousands of dollars for months.
Are you a "non-resident" seller for tax purposes?
Non-resident status depends on your residential ties to Canada (home, family, property, presence), not on citizenship alone. A Canadian expatriate or a foreign investor holding a plex on the North Shore may be a non-resident for section 116 purposes. Because that status triggers the buyer's withholding, have it confirmed before you sell.
The very first question to settle is not fiscal but factual: at the time of sale, are you a resident or a non-resident of Canada for tax purposes? This is not a passport question. The CRA weighs your overall residential ties: where your home, spouse and dependants are, where your property is, your health coverage, and the number of days you spend in the country.
In practice, two owner profiles come up on the North Shore: the Quebecer who moved abroad (United States, France, the Gulf) and kept a triplex or quadruplex as retirement income, and the foreign investor who bought a rental building without ever settling in Canada. In both cases, disposing of the plex falls under section 116.
Because the consequence — the withholding — is heavy, don't assume your status: have it confirmed by a tax advisor or directly by the CRA before you even sign a purchase offer.
Source: Revenu Québec — Tax Obligations of Non-Residents of Québec.
Why the buyer withholds 25% (or 50%) of your plex's price
Section 116 makes the buyer personally liable for the non-resident seller's tax. Without a certificate of compliance, the buyer must remit to the CRA 25% of the cost of the property (the price), and 50% on the depreciable portion of the building subject to recapture. The buyer therefore withholds that amount from the price.
The logic of the law is simple: once the sale closes, a non-resident seller could leave the country with the proceeds without ever paying tax on the gain. To prevent that, section 116 shifts the risk onto the buyer. Under subsection 116(5), if the seller does not provide a certificate of compliance, the buyer becomes personally liable for the seller's tax and may withhold the corresponding amount from the price.
In concrete terms, two rates apply depending on the nature of the property sold:
- 25% of the cost of the property (the sale price) on the "capital property" portion — this rate targets the capital gain on the land and building;
- 50% on the depreciable portion of the building where there is recapture of capital cost allowance (depreciation claimed in the past that becomes taxable again on sale).
Since a plex is both land (capital property) and a depreciable building, the withholding often combines both. On a North Shore income property sold for, say, $900,000, the amount held back can easily exceed $200,000 until the certificates are produced.
The withholding is not your final tax
The 25%/50% withholding is a security deposit, not your final tax bill. Your actual tax is calculated on your net gain and settled when you file your return. Any excess withheld is refunded to you — but that can take months, which is why obtaining the certificate to reduce the amount locked up from the outset matters.
The CRA certificate of compliance: forms and the 10-day deadline
The seller notifies the CRA of the disposition, no later than 10 days after the sale (subsection 116(3)), using Form T2062 (capital gain) and, where there is recapture, Form T2062A. After paying an amount covering the tax or posting security, the CRA issues the certificate of compliance that releases the buyer.
To release the buyer — and yourself — from this withholding, you must obtain a certificate of compliance (the "section 116 certificate") from the CRA. The process relies on a notice of disposition and two forms:
| CRA form | What it is for |
|---|---|
| T2062 | Request for a certificate of compliance for the disposition of taxable Canadian property — covers the capital gain on land and building. |
| T2062A | Used when there is recapture of capital cost allowance on depreciable property (the rental building). Filed alongside the T2062. |
The deadline is strict: under subsection 116(3), you must notify the CRA of the disposition either before the sale or no later than 10 days after it. It is strongly recommended to file a notice of proposed disposition as soon as the purchase offer is signed, so the CRA can start processing before closing.
Once the CRA has received an amount covering the estimated tax on the gain, or acceptable security, it issues the certificate of compliance to the seller and the buyer. This certificate sets a "certificate limit" and releases the buyer from part of their section 116 liability.
Penalty for late notice
A notice filed outside the 10-day window results in a penalty of $25 per day late, with a minimum of $100 and a maximum of $2,500, under subsection 162(7) of the Act.
Sources: CRA — Form T2062 · CRA — Form T2062A · CRA — Failure to comply penalty.
The parallel process with Revenu Québec (Form TP-1097)
Because the property is in Québec, a second procedure applies: the non-resident seller must notify Revenu Québec within 10 days of the disposition, using Form TP-1097. After paying the estimated Québec tax or posting security, Revenu Québec issues its own certificate (TPF-1098) that releases the buyer.
Selling a plex in Québec means dealing with two levels of tax authority. In addition to the CRA, Revenu Québec requires a separate notice for the disposition of "taxable Québec property" by a non-resident. The form is the TP-1097 — Notice of Disposition or Proposed Disposition of Taxable Québec Property by an Individual or Corporation Not Resident in Canada.
The principle mirrors the CRA's: the non-resident must notify the minister within 10 days of the actual disposition, and may also signal a proposed disposition (for example, upon signing the purchase offer). If the disposition generates a taxable gain and the seller pays the calculated tax or provides acceptable security, Revenu Québec issues the TPF-1098 certificate to the seller and the buyer. That certificate releases the buyer from any tax liability related to the transaction on the Québec side.
A Québec penalty too
An individual who fails to file the notice of disposition (TP-1097) within the allotted time is liable to a penalty of $25 per day, up to a maximum of $2,500, according to Revenu Québec.
Remember that both procedures must run in parallel: a federal certificate does not replace the Québec one, and vice versa. The notary will wait for both before releasing the withholding.
Sources: Revenu Québec — Form TP-1097 · Revenu Québec — Failure to file a notice of disposition by a non-resident vendor.
The central role of the notary at closing
The notary verifies your residency status, holds the required amount (25%/50%) in trust at closing, releases it only when the CRA and Revenu Québec certificates arrive, remits any amount due to the authorities and pays the balance to the seller. This protects the buyer from section 116 liability.
In Québec, the sale of real estate must go through a notary, and the notary orchestrates the withholding mechanics. Their typical steps:
- Verify the seller's residency status and require a declaration on the point in the deed of sale;
- Hold in trust the required amount (25%, increased for the depreciable portion) rather than paying it to the seller;
- Wait for the certificates of compliance from the CRA and Revenu Québec before any release;
- Remit to the authorities the amounts due per the certificates, then pay the balance to the non-resident seller.
This trust holdback protects the buyer — who, without it, would remain exposed under subsection 116(5) — and reassures the seller, who knows exactly what unlocks their funds. On a North Shore multi-unit building, it is the notary who coordinates the timeline between closing and the issuance of the certificates.
"Without a certificate of compliance, the purchaser may become liable, under subsection 116(5), to remit an amount of tax on behalf of the seller; the purchaser is then entitled to withhold that amount from the purchase price."
— Paraphrase of CRA Information Circular IC72-17R6 (section 116)How to plan ahead and sell your plex without a hold-up
Plan ahead by declaring your non-resident status at the offer stage, filing the notices of proposed disposition (T2062/T2062A with the CRA, TP-1097 with Revenu Québec) before closing, gathering acquisition cost, capital expenses and depreciation history, and engaging a notary and tax advisor early. The withholding stays in trust until the certificates arrive.
The difference between a smooth sale and months of frozen funds comes down to anticipation. Here is the path to follow for a non-resident owner of a plex on the North Shore:
- Declare your status early. Tell the buyer, the broker and the notary, right at the purchase-offer stage, that the seller is a non-resident.
- File the proposed disposition notice. Don't wait for closing: file the T2062/T2062A with the CRA and the TP-1097 with Revenu Québec as soon as the offer is signed, to start processing.
- Gather your numbers. Acquisition cost, capital expenses (major renovations), and above all the depreciation history claimed — that determines the recapture and the 50% portion.
- Engage the notary and tax advisor together. Coordinating the two processes (federal and provincial) and calculating the withholding calls for professionals used to non-resident files.
- Budget for the trust holdback. Accept that the withholding stays locked until the certificates arrive, and factor that delay into your cash-flow planning.
Selling to a direct buyer simplifies coordination
- A buyer used to non-resident files understands the withholding and isn't scared off by it
- No chain of uncertain buyers backing out over the tax complexity
- A realistic closing timeline aligned with CRA and Revenu Québec processing times
- Direct communication with your notary on the trust mechanics
For the other tax aspects of a sale, see our articles on capital gains when selling your plex, on CCA recapture, and our guide to the costs of selling an income property. To discuss your situation, reach us on the contact page.
A full worked example: a North Shore plex sold for $900,000
On a North Shore triplex sold for $900,000 by a non-resident, the buyer withholds 25% of the price ($225,000) by default — more if there is a large depreciable portion — until the section 116 certificate of compliance is produced. This withholding is a security deposit: the real tax is computed on the net gain, and the excess is refunded after assessment.
Nothing makes the section 116 mechanics as concrete as a worked example. Take a case we see often on the North Shore: a triplex in Blainville held for twelve years by an owner now settled in France, and therefore a non-resident of Canada for tax purposes. The building sells for $900,000. Here is how the withholding breaks down, step by step.
Step 1 — The "gross" withholding the buyer requires
Without a certificate of compliance in hand at closing, the buyer (through the notary) applies the default rule: 25% of the sale price on the "capital property" portion. On $900,000, that means $225,000 held in trust. If part of the price is allocated to the depreciable building and there is recapture of capital cost allowance, that fraction is withheld at 50% rather than 25%. The notary always holds the more conservative amount until the figures are validated by a certificate.
| Item | Amount | Basis of withholding |
|---|---|---|
| Triplex sale price | $900,000 | — |
| Default withholding (25%) | $225,000 | Section 116 — no certificate |
| Portion allocated to land (capital property) | e.g. $250,000 | Capital gain |
| Portion allocated to building (depreciable) | e.g. $650,000 | Gain + possible CCA recapture |
| Additional Québec withholding | on top | TP-1097 / TPF-1098 |
Land/building splits shown for illustration; the actual allocation appears in the deed of sale and the assessment roll. Have it validated by your tax advisor.
Step 2 — The real gain, far below the withholding
The $225,000 withholding is not your tax. Assume an acquisition cost of $540,000 twelve years ago and $60,000 of capital expenses (roof, windows). The gross capital gain would be roughly $300,000 ($900,000 − $600,000), plus recapture of the depreciation claimed over the years. Yet only a percentage of the gain is taxable: in Canada, the inclusion rate remains one-half for individuals below the $250,000 annual gains threshold, the increase to two-thirds having been deferred by the Department of Finance.
Source: Department of Finance Canada — Deferral of the capital gains inclusion rate increase.
In other words, the tax actually owed on this gain is well below the $225,000 withheld. That is precisely the role of the certificate of compliance: by paying the CRA an amount covering the real estimated tax (on the net gain, not the gross price), you have the withholding brought down to that much smaller amount and release the balance far sooner.
Step 3 — What the seller actually receives at closing
Two scenarios contrast sharply:
- Without a certificate obtained in time: the notary keeps $225,000 in trust. The seller leaves closing with $675,000 (less other costs) and waits months for the excess to be refunded after filing the tax return.
- With a certificate obtained before closing: the withholding is capped at the certificate limit set by the CRA — say the real estimated tax on the gain. The seller cashes out much faster, and only the necessary amount stays locked.
The cash-flow difference runs into tens of thousands of dollars
Between a withholding capped at the real tax and a "default" 25% of price, the immediate liquidity gap on a $900,000 plex frequently exceeds $150,000. That money stays yours — but frozen until assessment. Hence the vital importance of anticipating the certificate.
The real timeline: from purchase offer to final refund
The CRA recommends being notified at least 30 days before the disposition to have time to validate the payment or security. Failing a certificate, the buyer must remit the withholding to the Receiver General within 30 days after the end of the month of acquisition. On the Québec side, the notice (TP-1097) is due within 10 days of the disposition. The refund of the excess follows the filing of the tax return.
Most hold-ups come not from the law but from the timeline. Three official deadlines overlap, and missing them is costly in penalties and frozen cash. Here is the typical chronology of a multi-unit sale by a non-resident.
Before closing: the "proposed" disposition notice
In its Information Circular IC72-17R6, the CRA states that the vendor should send the notice at least 30 days before the actual disposition, to give the Agency time to review the transaction and verify that the vendor's payment or security is adequate. That is the ideal moment to file a notice of proposed disposition (T2062/T2062A with the CRA, TP-1097 with Revenu Québec): as soon as the purchase offer is signed, before you even reach the notary.
Source: CRA — Disposing of or acquiring certain Canadian property (section 116).
At closing: the trust holdback
If the certificate is not yet issued on signing day, the notary holds the required amount in trust. Those funds are not released to the seller: they stay in the notary's trust account until the federal and provincial certificates arrive.
After closing: the buyer's remittance deadline
Crucial for the buyer: if they have not received a section 116 certificate, they must remit the withheld amount to the Receiver General for Canada within 30 days after the end of the month in which they acquired the property, and are entitled to deduct it from the price. This deadline is why buyers and their notaries are so strict about the withholding: their own liability is on the line.
Source: CRA — Purchaser obligations (section 116).
| Milestone | Deadline | Who acts |
|---|---|---|
| Proposed disposition notice (recommended) | ≥ 30 days before sale | Seller (CRA + RQ) |
| Actual disposition notice (if not filed earlier) | ≤ 10 days after sale | Seller (CRA + RQ) |
| Buyer's remittance if no certificate | ≤ 30 days after end of month of acquisition | Buyer → Receiver General |
| Refund of excess withholding | After the tax return is filed | CRA / RQ → seller |
"The vendor should send the notice at least 30 days before the actual disposition of the property, to allow sufficient time to review the transaction and verify that the vendor's payment or security is adequate."
— Paraphrase of CRA Information Circular IC72-17R6 (section 116)Special cases: corporation, co-ownership, estate and a loss sale
The section 116 withholding also applies when the plex is held by a non-resident corporation, in undivided co-ownership among several owners (each share is treated separately), or by an estate whose liquidator or heirs are non-residents. Even a sale at a loss requires the disposition notice: the certificate then avoids an unwarranted withholding.
The "standard" case — an individual non-resident selling their plex — does not cover every situation. Here are the most common configurations on the North Shore and what they change.
Plex held by a non-resident corporation
When a corporation (incorporated in Canada or not, but resident outside the country for tax purposes) holds the building, section 116 applies just the same: the buyer withholds, and the corporation must file the same disposition notices. The difference lies in the corporation's taxation and the treatment of CCA recapture at its tax rate. A selling corporation has all the more reason to obtain the certificate to avoid tying up a major share of the sale proceeds.
Undivided co-ownership among several non-residents
If the plex belongs to several people in undivided co-ownership — two expatriate siblings, a couple, co-heirs — each share is treated separately. Each non-resident co-owner must file their own disposition notice and obtain their own certificate for their fraction. If one co-owner is a resident of Canada and the other is not, only the non-resident's share is subject to the withholding. The notary allocates the withholding accordingly.
Sale by an estate whose heirs are non-residents
When an owner dies holding a plex, there is first a deemed disposition at death, then an actual sale by the estate. If the liquidator or beneficiaries are non-residents, the subsequent sale falls under section 116. These files stack two tax layers; they require tight coordination between the notary, the liquidator and a tax advisor. Our guide on selling an income property in an estate details this angle.
Sale at a loss: the notice is still mandatory
It is often wrongly believed that the absence of a gain waives any procedure. Not so: even a sale at a loss or at no profit requires the disposition notice. It is precisely the certificate of compliance that, by confirming no tax is owed, spares the buyer from having to withhold 25% for nothing. Without a notice, the "default" withholding applies anyway, and you must then claim the full refund through your tax return.
Three reflexes depending on your holding structure
- Corporate holding: validate the tax rate and recapture at the corporate level
- Co-ownership: one notice and one certificate per non-resident share
- Estate: coordinate the deemed disposition at death with the actual sale via the liquidator
- Loss sale: file the notice anyway to avoid a needless withholding
Source: Revenu Québec — Tax obligations of non-residents of Québec.
The documents to gather before filing your disposition notice
For the CRA and Revenu Québec to process your certificate request without back-and-forth, gather: the original acquisition cost (deed of sale), documented capital expenses, the full history of capital cost allowance (CCA) claimed, the purchase offer, the land/building allocation and your tax identification numbers. An incomplete file lengthens the delay — and therefore the period your funds stay frozen.
The main factor that lengthens the processing of a certificate of compliance is not the CRA's workload: it is an incomplete file that triggers requests for information. Here is the list of documents to gather as soon as the purchase offer is signed.
The adjusted cost base (ACB) calculation
Your gain is computed from the acquisition cost plus capital expenses (durable improvements, not routine maintenance). You therefore need:
- the original deed of sale establishing the price paid at purchase;
- the invoices for major capitalizable work (roof, windows, structure, extension);
- proof of the transfer duties and notary fees paid at acquisition, added to the cost.
The depreciation history (CCA)
This is the most frequently missing — and most decisive — item. The capital cost allowance claimed each year on the building reduces its tax cost; on sale, that depreciation "comes back" as recapture, fully taxable. Gather the year-by-year detail (tax schedules, financial statements of the plex). Without it, it is impossible to calculate the portion subject to the 50% withholding. Our article on CCA recapture explains this mechanism in detail.
The transaction and tax-identity documents
| Document | Why |
|---|---|
| Signed purchase offer | Sets the price and disposition date |
| Land / building allocation | Separates capital gain from recapture |
| Tax identification number (ITN/SIN or business number) | Needed for federal and provincial processing |
| Depreciation history | Calculates the 50% portion |
| Contact details of the instrumenting notary | Receives and releases the withholding |
An incomplete file = extra weeks, funds frozen longer
Every request for additional information from the CRA or Revenu Québec resets the clock. Because the withholding stays in trust until the certificate is issued, a sloppy file is paid for directly in frozen cash. Prepare everything before filing the notice.
Planning ahead: the levers to reduce the withholding and the delay
Three levers reduce the impact of the withholding: filing the notice of proposed disposition as early as possible (ideally 30 days before closing), paying the CRA an amount covering the real estimated tax (rather than suffering 25% of the price), and selling to a direct buyer versed in non-resident files. Neither citizenship nor good faith waives the procedure: only anticipation neutralizes it.
You cannot escape section 116, but you can control its impact. Planning, begun the moment you consider selling your plex, makes all the difference between a smooth closing and months of frozen funds.
Lever 1 — Move early
The most powerful lever is the simplest: act early. By filing the notice of proposed disposition 30 days or more before closing, you give the CRA and Revenu Québec time to issue the certificates before signing. The result: the withholding is capped at the certificate limit from the outset, and the notary holds only the strict minimum.
Lever 2 — Pay the real tax, not the gross withholding
Once the net gain is calculated (with a tax advisor), you can pay the CRA an amount covering the estimated tax on that gain, or provide acceptable security. The Agency then issues the certificate on that basis. You thereby replace a withholding of 25% of the price with a sum keyed to your real tax — often a fraction of the default amount.
Lever 3 — Choose a buyer who knows the mechanics
Many non-resident sales fall through because the poorly advised individual buyer takes fright at the withholding and walks away. A direct buyer like ImmoMulti, used to section 116 files on the North Shore, knows exactly how to structure the trust, what timeline to propose and how to coordinate with your notary. Tax complexity does not scare off a buyer who understands it.
What anticipation earns you
- A withholding capped at the real tax rather than 25% of the price
- Certificates issued before closing, so fewer frozen funds
- Zero late-notice penalty ($25/day avoided)
- A realistic closing timeline aligned with tax-authority processing
- A buyer who does not back out over the complexity
The five costliest mistakes non-resident sellers make
The most expensive missteps are: assuming citizenship settles your residency status, waiting until closing to file the notice, ignoring the depreciation history that drives the 50% portion, treating the 25% withholding as final tax, and choosing a buyer who panics at the complexity. Each one either triggers a penalty or freezes more of your cash for longer.
Over many North Shore transactions with owners living abroad, the same avoidable errors recur. Knowing them in advance is the cheapest form of insurance for a plex sale.
Mistake 1 — Assuming your passport decides your status
Residency for tax purposes turns on your residential ties to Canada — home, family, property, days of presence — not on citizenship. A Canadian citizen abroad can be a non-resident; a foreign national with strong ties could be a resident. Getting this wrong at the offer stage means the withholding surprises everyone at closing. Confirm it early with a tax advisor or the CRA.
Mistake 2 — Waiting until closing to file
Filing the disposition notice only at or after closing forfeits the chance to have the certificate issued before signing. The CRA suggests 30 days' notice; a late actual-disposition notice past the 10-day window also risks the $25-per-day penalty. Filing the proposed-disposition notice at the offer stage sidesteps both.
Mistake 3 — Losing the depreciation record
Sellers who never kept their year-by-year capital cost allowance schedules cannot substantiate the recapture, which delays the certificate and can push the notary to hold the more conservative 50% on the building portion. Reconstructing this from old tax returns and the plex's financial statements is worth the effort.
Mistake 4 — Treating the withholding as your tax bill
The 25%/50% held in trust is a security deposit, not your liability. Sellers who confuse the two either under-price the sale in a panic or fail to plan the cash-flow gap. The real tax is on the net gain; the excess comes back. The certificate simply caps the hold at the real figure sooner.
Mistake 5 — Choosing a buyer who fears the file
An individual buyer, poorly advised, may walk away when the section 116 withholding surfaces late — collapsing the deal and forcing you to re-list. A direct buyer who runs these files routinely structures the trust, sets a realistic timeline and works straight with your notary. That single choice removes the most common cause of a failed non-resident sale.
Turn each mistake into a checklist item
- Confirm residency status in writing before the offer
- File the proposed-disposition notice at the offer stage, not at closing
- Rebuild and keep the full CCA history
- Budget the cash-flow gap; expect a refund of the excess
- Pick a buyer experienced with non-resident closings
For the wider tax picture, pair this guide with our articles on capital gains and CCA recapture, or reach us directly on the contact page.
