Section 116 Certificate: Selling Canadian Property
Notifying the CRA, the buyer's withholding, Forms T2062 and T2062A, and the return that settles the tax
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
A section 116 certificate is the CRA's clearance for a non-resident selling taxable Canadian property, usually real estate. Without it, the buyer must withhold 25 percent of the gross price — 50 percent on depreciable property such as a rental building. The seller notifies the CRA on Form T2062, prepays tax on the gain, and files a Canadian return.
On this page
How it works
| Step | Detail |
|---|---|
| Notify | Form T2062 (and T2062A for depreciable property, resource property or real estate held as inventory) no later than 10 days after the sale, or before it — late notice costs C$25 a day (minimum C$100, maximum C$2,500) |
| Pay or secure | 25 percent of the gain (proceeds minus adjusted cost base), plus tax at the applicable federal rate on any recapture of depreciation (reported on T2062A), or acceptable security |
| Certificate | The CRA issues the certificate (T2064 for a proposed sale, T2068 for a completed one) once the payment or security is received; it sets a certificate limit, normally the sale price |
| Buyer's holdback | Purchaser's lawyer holds back 25 or 50 percent of the gross price until the certificate arrives |
| Final return | The non-resident files a Canadian return for the year reporting the actual gain; the prepayment is credited |
Why timing matters
The CRA often takes several months to issue the certificate; the buyer's lawyer holds the holdback in trust, but if no certificate has been issued, the purchaser must remit it to the CRA within 30 days after the end of the month in which the property was acquired (subsection 116(5)). Filing T2062 early — the CRA asks for notice of a proposed sale at least 30 days before closing — shortens the wait. Quebec property adds Revenu Québec's own certificate and withholding (the Quebec cross-border guide).
The U.S. side
A U.S. resident reports the same sale on their U.S. return (worldwide income), with the principal residence exclusion where it applies (the selling a Canadian home guide) and a foreign tax credit for the Canadian tax actually paid on the final Canadian return.
Frequently asked questions
What is a section 116 certificate?
The CRA's certificate of compliance for a non-resident selling Canadian property, issued once tax on the gain is paid or secured; it frees the buyer from withholding up to the certificate limit.
How much does the buyer withhold without it?
25 percent of the gross price, or 50 percent for depreciable property such as a rental building.
When must I file Form T2062?
Within 10 days after the sale — earlier is better.
Do I still file a Canadian return?
Yes, to report the actual gain and recover any excess payment.
Official sources
The Canada Revenue Agency explains: “If you do not let the CRA know about your disposition, and a Certificate of Compliance (Form T2064 or Form T2068) is not issued, the purchaser may become liable to pay a specified amount of tax that arises from the disposition on behalf of the vendor.” — Canada Revenue Agency, Disposing of or acquiring certain Canadian property, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/disposing-acquiring-certain-canadian-property.html
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our Canadian Tax Desk handles section 116 notifications and certificates, purchaser holdback coordination, and non-resident Canadian returns. See pricing or book a call.
Cross-border taxes, handled in one place
U.S. and Canadian filings prepared together by our U.S. and Canadian Tax Desks.
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