Non-Resident Withholding Tax

Non-Resident Withholding Tax refers to a federal obligation under the Income Tax Act (Canada) requiring the purchaser of Canadian real property to withhold and remit a portion of the purchase price to the Canada Revenue Agency (CRA) when the seller is a non-resident of Canada for tax purposes. The withholding amount is generally 25% (as of 2026-07-27 — verify current) of the purchase price or 50% (as of 2026-07-27 — verify current) of the capital gain if the seller elects that method. In BC, notaries and lawyers managing the conveyance typically hold back the required amount in trust at completion and remit it to CRA on behalf of the purchaser unless the seller provides a valid clearance certificate. Verify current withholding rates and procedures with a BC lawyer, notary, or licensed tax professional before acting.

Under the Income Tax Act (Canada), the purchaser is ultimately responsible for withholding and remitting the required amount to the CRA when buying property from a non-resident seller. In practice, the purchaser's lawyer or notary managing the transaction withholds the funds from the proceeds payable to the seller at completion and remits them to CRA on the purchaser's behalf. If the purchaser fails to withhold and remit, the purchaser may be personally liable to CRA for the amount that should have been withheld, plus interest and penalties. Verify your obligations with a BC lawyer, notary, or licensed tax professional before completing any transaction involving a non-resident seller.

A Section 116 Clearance Certificate is a document issued by the CRA under section 116 of the Income Tax Act (Canada) confirming that a non-resident seller has either paid the required Canadian tax on the disposition or posted acceptable security. If the seller provides a valid clearance certificate before or at completion, the purchaser is relieved of the obligation to withhold from the purchase price. BC conveyancers routinely request proof of residency or a clearance certificate as part of standard due diligence before closing. Verify the current application process and timing with a BC lawyer, notary, or licensed tax professional before acting.

Under the Income Tax Act (Canada), if no clearance certificate is provided, the purchaser (or the purchaser's lawyer or notary) must generally withhold 25% (as of 2026-07-27 — verify current) of the gross purchase price, or, if the seller makes an election, 50% (as of 2026-07-27 — verify current) of the capital gain realized on the sale. The amount withheld must be remitted to the CRA within 30 days (as of 2026-07-27 — verify current) after the end of the month in which the property was acquired. Specific rates, percentages, and timelines may change, and exceptions may apply for certain types of property or transactions. Verify current withholding requirements with a BC lawyer, notary, or licensed tax professional before acting.

No. Non-Resident Withholding Tax is a federal obligation under the Income Tax Act (Canada) and applies uniformly across all of Canada, including all regions of British Columbia. The withholding requirement is based solely on the seller's tax residency status and the nature of the property being sold, not on the property's location within BC. However, BC buyers may also be subject to additional provincial taxes such as the Additional Property Transfer Tax under the Property Transfer Tax Act, RSBC 1996, c. 378, if the buyer is a foreign entity or taxable trustee, and the federal Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c. 10 (currently extended through January 1, 2027 — verify current), may restrict certain purchases. Verify all applicable taxes and restrictions with a BC lawyer, notary, or licensed tax professional before acting.

Under the Income Tax Act (Canada), if a purchaser fails to withhold and remit the required amount to the CRA when purchasing property from a non-resident seller, the purchaser becomes personally liable to the CRA for the amount that should have been withheld, plus interest and penalties. The CRA may pursue the purchaser directly for collection, and the purchaser's only recourse is typically to seek recovery from the non-resident seller, which can be difficult if the seller is outside Canada. This is why BC conveyancers confirm seller residency status and either obtain a clearance certificate or hold back the withholding amount in trust as a standard step before completion. Verify your obligations and protections with a BC lawyer, notary, or licensed tax professional before acting.

BC notaries and lawyers typically require the seller to complete a statutory declaration or certificate of residency confirming their tax residency status for Canadian income tax purposes as of the closing date. The declaration is a standard conveyancing document in BC and is reviewed before the transaction completes. If the seller confirms non-residency, the conveyancer will either request a Section 116 Clearance Certificate from CRA or withhold the required percentage of the purchase price in trust and remit it to CRA on behalf of the purchaser. Verify current best practices and documentation requirements with a BC lawyer or notary before acting.

No. Under the Income Tax Act (Canada), the Section 116 clearance certificate application should be made before or at the time of closing, and the certificate must be obtained and provided to the purchaser to relieve the purchaser of the withholding obligation. If the seller does not obtain a clearance certificate before completion, the purchaser (or their lawyer or notary) must withhold and remit the required amount to CRA at closing. The seller may apply for a refund or adjustment from CRA afterward if they can demonstrate that the actual tax owing is less than the amount withheld, but this does not eliminate the purchaser's obligation to withhold at the time of sale. Verify timing and procedures with a BC lawyer, notary, or licensed tax professional before acting.

Under the Income Tax Act (Canada), non-resident withholding obligations are triggered by a "disposition" of taxable Canadian property, which includes sales, gifts, and transfers for nominal or no consideration if the property has appreciated in value and a deemed disposition occurs for tax purposes. The CRA may still require a clearance certificate or withholding even if no money changes hands, depending on the circumstances and whether a capital gain is realized. BC conveyancers should confirm residency and withholding obligations in all transfers involving non-resident transferors, regardless of stated consideration. Verify the application of withholding rules to your specific transfer with a BC lawyer, notary, or licensed tax professional before acting.

No. Non-Resident Withholding Tax is a federal obligation under the Income Tax Act (Canada) imposed on the purchaser when buying from a non-resident seller, requiring withholding and remittance to the CRA. BC's Additional Property Transfer Tax is a provincial tax under the Property Transfer Tax Act, RSBC 1996, c. 378, imposed on certain foreign buyers, foreign corporations, and taxable trustees when they acquire residential property in specified areas of BC; the current rate is 20% (as of 2026-07-27 — verify current) of the fair market value, paid by the buyer in addition to the standard Property Transfer Tax. The two are separate obligations administered by different levels of government and may both apply to the same transaction. Verify all applicable taxes with a BC lawyer, notary, or licensed tax professional before acting.