The short version: under Section 116 of Canada's Income Tax Act, when a non-resident of Canada sells Canadian real estate, the buyer is legally required to withhold a share of the sale proceeds and remit it to the CRA — unless the seller has obtained a clearance certificate in advance. This can mean a large portion of the proceeds gets held back at closing if it isn't planned for ahead of time.
Why this applies to estate sales specifically
This rule isn't about estates specifically — it applies to any non-resident selling Canadian real property. But it comes up constantly in estate situations, because beneficiaries who inherit a BC property often live outside Canada, and the sale of that inherited home triggers these same withholding rules, regardless of how the property was acquired.
How the withholding actually works
- If no clearance certificate is in place at closing, the purchaser is required to withhold a significant percentage of the gross sale price and remit it to the CRA — this is a meaningful amount, calculated on the full price, not just the gain
- The withholding rate and rules have changed in recent years, and can vary depending on the type of property — the exact current percentage should be confirmed directly with an accountant or the CRA at the time of the sale, since this is the kind of detail that gets updated
- A non-resident seller can apply to the CRA in advance for a clearance certificate (using form T2062), which can reduce the amount withheld to reflect the actual tax owing rather than the full statutory default
Why timing matters enormously here: applying for a clearance certificate takes real time with the CRA — this is not something to start the week before closing. Mark Jontz flags this immediately whenever a non-resident beneficiary is involved, specifically so there's enough runway to apply for the certificate and avoid a large, unnecessary chunk of the sale proceeds being tied up with the CRA longer than it needs to be.
What this means practically for the sale
This doesn't prevent a sale from happening — it's a tax administration matter that needs to be planned into the timeline, usually in coordination with an accountant experienced in non-resident taxation, alongside the estate lawyer handling the broader file. The buyer's lawyer will also want clarity on this before closing, since the buyer carries real liability if withholding isn't handled correctly.
A note on who this affects
This applies based on the seller's residency status for tax purposes, not their citizenship — a Canadian citizen who has become a non-resident for tax purposes is still subject to these rules when selling Canadian property. If there's any uncertainty about a beneficiary's residency status, that's worth clarifying with an accountant early, since it directly determines whether these rules apply.
This page provides general information and is not legal advice. Every situation is different — please consult a lawyer or notary about your specific circumstances.