How are foreign sellers taxed in Ontario?
“Selling Property in Ontario as a Foreigner? Here’s Exactly What the Government Will Take — Read This Before You Close”
Quick answer
Foreign (non-resident) sellers of Ontario real estate are taxed on the capital gain and face mandatory CRA withholding at closing unless they secure a Certificate of Compliance. Buyers may also face purchase-side taxes like the Non-Resident Speculation Tax (NRST) on purchases in the Greater Golden Horseshoe. Know Section 116, the 25% withholding rule, and how capital gains are calculated.
What taxes apply to foreign sellers in Ontario
- Capital gains tax: Non-residents are taxed on the disposition of taxable Canadian property. Capital gain = sale price minus adjusted cost base (what you paid plus improvements and selling costs). Only 50% of the capital gain is included in taxable income and taxed at applicable rates.
- Withholding tax (Section 116): When a non-resident sells Canadian property, the buyer or legal representative must withhold and remit an amount to the Canada Revenue Agency (CRA) unless the seller provides a Certificate of Compliance. The default withholding can be a substantial percentage of the sale proceeds.
- Non-Resident Speculation Tax (NRST): This is a separate purchase tax (25% in many areas of the Greater Golden Horseshoe) imposed on non-resident buyers — not a seller tax — but it affects the buyer pool and closing dynamics.
Step-by-step: how to avoid surprise withholding
- Confirm the property is taxable Canadian property (almost all Ontario real estate is).
- Hire a Canadian tax lawyer or accountant experienced in non-resident transactions immediately.
- File for a Certificate of Compliance (Form T2062 or T2062A) with the CRA to request clearance or a reduced withholding amount. This is the single most important move to protect your sale proceeds at closing.
- Provide the buyer and closing lawyer with the Certificate of Compliance before completion to avoid mandatory withholding.
- File your Canadian tax return to report the capital gain and reconcile any withholding.
Common pitfalls non-resident sellers make
- Waiting until closing to apply for the certificate. That triggers automatic withholding.
- Ignoring selling costs and adjusted cost base; overpaying tax by not claiming deductions.
- Assuming NRST rules don’t affect negotiations — they do.
Bottom line
Selling as a foreigner in Ontario is straightforward if you plan. Expect capital gains tax, expect CRA withholding unless you get a Certificate of Compliance, and get expert Canadian tax advice early. Small mistakes cost tens of thousands.
If you need local market guidance, closing strategies, or an introduction to trusted tax advisors in Ontario, contact Tony Sousa — top local realtor and market expert. Email: tony@sousasells.ca | Phone: 416-477-2620 | https://www.sousasells.ca
