How are foreign sellers taxed in Ontario?

How are foreign sellers taxed in Ontario?

How are foreign sellers taxed in Ontario? If you own property in Milton, ON and you’re not a Canadian resident, this question will cost you time and money if you ignore it. Read this now — no fluff, just the taxes, the traps, and the exact actions that protect your profit.

Quick answer — the headline

Foreign sellers in Ontario face immediate withholding rules, provincial taxes like the Non-Resident Speculation Tax (NRST) in some cases, possible capital gains taxes, and a sale hold-up under Section 116 of the Income Tax Act. If you sell property in Milton, ON without following the rules you can have up to 50% of the sale price withheld by the buyer, face penalties, and delay closing. Act proactively.

What this means for Milton, Ontario property owners

Milton is growing fast. Buyers pay premium prices. If you’re a non-resident selling in Milton, ON, the stakes are higher because:

• Property values produce bigger capital gains.
• Municipal and provincial tax rules apply the same in Milton as the rest of Ontario.
• Local closings require fast, accurate paperwork or your transaction stalls.

This guide shows the exact taxes foreign sellers face in Ontario, the steps to avoid a costly hold-up at closing, and practical moves to minimize tax exposure while staying compliant.

The four taxes and rules you must know

1. Section 116 withholding (federal) — the biggest risk at closing.
2. Capital gains tax — what you’ll actually owe after tax returns and credits.
3. Non-Resident Speculation Tax (NRST) — when it applies in Ontario.
4. Land transfer tax and municipal considerations — Toronto has extra charges; Milton follows Ontario rules and local LTT procedures during closing.

1) Section 116 withholding — why it matters for Milton sales

When a non-resident sells real property in Canada, the buyer (or purchaser’s lawyer) must withhold 25% of the purchase price (sometimes higher) and remit it to the Canada Revenue Agency (CRA) unless the seller obtains a clearance certificate. Practically:

• The buyer can withhold up to 50% of the purchase price in some cases.
• Without a clearance certificate, the sale closing can be delayed or reduced by the withheld amount.
• You must file a Canadian tax return after the sale to calculate actual tax owed. If you overpaid via withholding, CRA issues a refund.

Action steps for Milton sellers:

• Apply for a Section 116 clearance certificate from CRA immediately after accepting an offer.
• Work with a Canadian tax lawyer or accountant who files Section 116 forms correctly.
• Budget for potential interim cash needs in case withholding is applied at closing.

2) Capital gains tax — the real tax on profit

Selling property in Milton usually triggers capital gains tax on the profit (sale price minus adjusted cost base and allowable expenses). For non-residents:

• Only 50% of the capital gain is taxable.
• The tax rate depends on your residency and tax treaty benefits between Canada and your home country.
• You still must report the sale to CRA and pay tax on the taxable portion.

Practical points:

• Keep records: purchase price, improvements, legal fees, and commissions.
• Use a Canadian tax advisor to apply foreign tax credits if you’re taxed abroad.

3) Non-Resident Speculation Tax (NRST) — when it hits

Ontario levies a 25% NRST on purchases of residential property by individuals who are not citizens or permanent residents, in certain regions. NRST is mostly applied to purchases rather than sales, but you must understand it if you’re buying another property in Milton or if your sale triggers complex dealings.

Key facts:

• NRST is 25% of the purchase price in affected transactions.
• It’s targeted at foreign buyers and certain corporations.
• Exemptions exist — consult a specialist if you believe you qualify.

4) Land transfer tax and municipal rules in Milton

Ontario imposes a provincial land transfer tax; Toronto has an additional municipal tax. Milton buyers/sellers handle provincial tax at closing. For foreign sellers:

• Land transfer tax is usually a buyer’s cost, but deals can be structured where sellers provide credits or adjustments.
• Work with your Milton real estate lawyer to confirm amounts and timing.

How to avoid getting stuck at closing — practical checklist

1. Apply for the CRA clearance certificate (Section 116) right after acceptance.
2. Hire a Canadian tax accountant experienced with non-resident dispositions.
3. Provide buyer and lawyers with proof of your tax advisor’s plan to avoid arbitrary withholding.
4. Keep funds available for temporary withholding if clearance isn’t ready by closing day.
5. Ensure your Milton closing lawyer knows non-resident rules and coordinates with CRA.

If you skip these steps you risk delayed closings, seized funds, and penalties.

Real-life example — typical Milton scenario

You sell a semi-detached in Milton for $900,000. You bought it years ago for $400,000 and made $60,000 in improvements. Net gain looks large. Without a clearance certificate the buyer’s lawyer may withhold 25% of $900,000 = $225,000. You might only owe a fraction of that after tax returns. But without the paperwork, you don’t get access to the money at closing.

Do the math, get the clearance, and you keep control of sale proceeds.

Tax planning strategies that actually work

• File for the Section 116 clearance certificate early. It’s fast if your accountant provides the correct estimate of taxes payable.
• Consider timing the sale to maximize treaty benefits or offsets in your home country.
• Use a Canadian agent and lawyer in Milton who handle non-resident sales frequently.
• Structure sale proceeds to manage foreign exchange fees and transfer timing to minimize losses.

These are not hacks. They are required steps done the right way.

Working with local Milton professionals — why it matters

Local lawyers and accountants know the Milton market, local closing timelines, and who at CRA to contact. That reduces delays. A Milton-focused realtor helps structure offers and negotiation terms to include tax protection clauses, ensuring buyers can’t lean on you improperly if documents take time.

Closing — clear actions in 72 hours

If you just listed or accepted an offer in Milton, do this now:

1. Call a Canadian tax advisor experienced with Section 116 (do not wait).
2. Instruct your Milton closing lawyer to prepare for withholding contingencies.
3. Gather purchase and improvement receipts.
4. Confirm closing date flexibility with the buyer for clearance certificate timing.

Failing to act in the first 72 hours invites unnecessary withholding and risk.

Why choosing a local expert matters for Milton property sellers

Milton’s market moves fast. Tax rules don’t care how local the market is — but local pros stop deals from derailing. A single misfiled form or a late clearance certificate can cost hundreds of thousands on higher-value properties. That’s avoidable.

If you want guidance specific to your Milton property, contact the local expert below for immediate, practical help.

Contact: Tony Sousa — Local Realtor and Milton real estate specialist
Email: tony@sousasells.ca
Phone: 416-477-2620
Website: https://www.sousasells.ca

FAQ — quick answers to the questions Milton sellers ask

Do foreign sellers always have money withheld at closing?

Not always. With a Section 116 clearance certificate, withholding is typically avoided. Without it, the buyer’s lawyer is required to withhold a portion and remit it to CRA.

How long does the clearance certificate take?

Processing varies. If paperwork is complete, CRA can issue a certificate in weeks. Complex cases take longer. Apply immediately after accepting an offer.

How much tax will I actually owe?

You pay tax on the taxable portion of the capital gain. For non-residents, 50% of the gain is taxable. The final tax depends on your tax bracket and treaties with your home country. A Canadian tax accountant will estimate your liability and help secure a clearance certificate.

Does Milton have extra local taxes for foreign sellers?

Milton follows Ontario’s provincial rules. NRST is a provincial purchase tax, not a sale tax, and applies only in certain purchase scenarios. There is no additional Milton-specific foreign seller tax, but local closing procedures must be followed.

Can I get my withheld funds back?

If withholding exceeds your actual tax liability, you can file a Canadian tax return to claim a refund. This process can take time.

What documents should I prepare now?

• Proof of purchase and cost base (purchase agreement, title documents)
• Receipts for improvements and renovations
• Closing statements, legal and commission invoices
• Passport and residency documentation

Should I sell now or wait?

Sell when market timing, personal goals, and tax planning align. If tax clearance can’t be obtained quickly and you need funds, discuss alternatives with your Milton lawyer and tax advisor. Don’t make a rushed decision without professional guidance.

Where can I get help in Milton?

Use a Milton-based real estate lawyer experienced with non-resident sales, and a Canadian tax accountant who files Section 116 and non-resident returns. The right local team shortens closing timelines and protects your proceeds.

Final note — act fast, protect your profit

Selling property in Milton, ON as a foreign owner is straightforward if you follow the rules. The most common failure is waiting. Apply for the clearance certificate, hire local professionals, and get your records in order. That preserves your proceeds and avoids unnecessary delays.

For immediate, results-focused help on a Milton property sale, contact Tony Sousa — local realtor and Milton specialist at tony@sousasells.ca or 416-477-2620.