ImmoMulti — a direct buyer of income properties on the North Shore — regularly works with owners who live abroad. If you are a non-resident of Canada selling your plex, one rule often catches sellers off guard: the buyer is legally required to withhold part of the price — 25%, sometimes 50% — and remit it to the tax authorities, unless you give them a certificate of compliance from the Canada Revenue Agency (CRA) and Revenu Québec. This section 116 mechanism of the Income Tax Act exists to guarantee the tax on your gain is paid before the funds leave the country. Anticipated properly, it isn't a deal-breaker; handled poorly, it can lock up tens of thousands of dollars for months.
Are you a "non-resident" seller for tax purposes?
Non-resident status depends on your residential ties to Canada (home, family, property, presence), not on citizenship alone. A Canadian expatriate or a foreign investor holding a plex on the North Shore may be a non-resident for section 116 purposes. Because that status triggers the buyer's withholding, have it confirmed before you sell.
The very first question to settle is not fiscal but factual: at the time of sale, are you a resident or a non-resident of Canada for tax purposes? This is not a passport question. The CRA weighs your overall residential ties: where your home, spouse and dependants are, where your property is, your health coverage, and the number of days you spend in the country.
In practice, two owner profiles come up on the North Shore: the Quebecer who moved abroad (United States, France, the Gulf) and kept a triplex or quadruplex as retirement income, and the foreign investor who bought a rental building without ever settling in Canada. In both cases, disposing of the plex falls under section 116.
Because the consequence — the withholding — is heavy, don't assume your status: have it confirmed by a tax advisor or directly by the CRA before you even sign a purchase offer.
Source: Revenu Québec — Tax Obligations of Non-Residents of Québec.
Why the buyer withholds 25% (or 50%) of your plex's price
Section 116 makes the buyer personally liable for the non-resident seller's tax. Without a certificate of compliance, the buyer must remit to the CRA 25% of the cost of the property (the price), and 50% on the depreciable portion of the building subject to recapture. The buyer therefore withholds that amount from the price.
The logic of the law is simple: once the sale closes, a non-resident seller could leave the country with the proceeds without ever paying tax on the gain. To prevent that, section 116 shifts the risk onto the buyer. Under subsection 116(5), if the seller does not provide a certificate of compliance, the buyer becomes personally liable for the seller's tax and may withhold the corresponding amount from the price.
In concrete terms, two rates apply depending on the nature of the property sold:
- 25% of the cost of the property (the sale price) on the "capital property" portion — this rate targets the capital gain on the land and building;
- 50% on the depreciable portion of the building where there is recapture of capital cost allowance (depreciation claimed in the past that becomes taxable again on sale).
Since a plex is both land (capital property) and a depreciable building, the withholding often combines both. On a North Shore income property sold for, say, $900,000, the amount held back can easily exceed $200,000 until the certificates are produced.
The withholding is not your final tax
The 25%/50% withholding is a security deposit, not your final tax bill. Your actual tax is calculated on your net gain and settled when you file your return. Any excess withheld is refunded to you — but that can take months, which is why obtaining the certificate to reduce the amount locked up from the outset matters.
The CRA certificate of compliance: forms and the 10-day deadline
The seller notifies the CRA of the disposition, no later than 10 days after the sale (subsection 116(3)), using Form T2062 (capital gain) and, where there is recapture, Form T2062A. After paying an amount covering the tax or posting security, the CRA issues the certificate of compliance that releases the buyer.
To release the buyer — and yourself — from this withholding, you must obtain a certificate of compliance (the "section 116 certificate") from the CRA. The process relies on a notice of disposition and two forms:
| CRA form | What it is for |
|---|---|
| T2062 | Request for a certificate of compliance for the disposition of taxable Canadian property — covers the capital gain on land and building. |
| T2062A | Used when there is recapture of capital cost allowance on depreciable property (the rental building). Filed alongside the T2062. |
The deadline is strict: under subsection 116(3), you must notify the CRA of the disposition either before the sale or no later than 10 days after it. It is strongly recommended to file a notice of proposed disposition as soon as the purchase offer is signed, so the CRA can start processing before closing.
Once the CRA has received an amount covering the estimated tax on the gain, or acceptable security, it issues the certificate of compliance to the seller and the buyer. This certificate sets a "certificate limit" and releases the buyer from part of their section 116 liability.
Penalty for late notice
A notice filed outside the 10-day window results in a penalty of $25 per day late, with a minimum of $100 and a maximum of $2,500, under subsection 162(7) of the Act.
Sources: CRA — Form T2062 · CRA — Form T2062A · CRA — Failure to comply penalty.
The parallel process with Revenu Québec (Form TP-1097)
Because the property is in Québec, a second procedure applies: the non-resident seller must notify Revenu Québec within 10 days of the disposition, using Form TP-1097. After paying the estimated Québec tax or posting security, Revenu Québec issues its own certificate (TPF-1098) that releases the buyer.
Selling a plex in Québec means dealing with two levels of tax authority. In addition to the CRA, Revenu Québec requires a separate notice for the disposition of "taxable Québec property" by a non-resident. The form is the TP-1097 — Notice of Disposition or Proposed Disposition of Taxable Québec Property by an Individual or Corporation Not Resident in Canada.
The principle mirrors the CRA's: the non-resident must notify the minister within 10 days of the actual disposition, and may also signal a proposed disposition (for example, upon signing the purchase offer). If the disposition generates a taxable gain and the seller pays the calculated tax or provides acceptable security, Revenu Québec issues the TPF-1098 certificate to the seller and the buyer. That certificate releases the buyer from any tax liability related to the transaction on the Québec side.
A Québec penalty too
An individual who fails to file the notice of disposition (TP-1097) within the allotted time is liable to a penalty of $25 per day, up to a maximum of $2,500, according to Revenu Québec.
Remember that both procedures must run in parallel: a federal certificate does not replace the Québec one, and vice versa. The notary will wait for both before releasing the withholding.
Sources: Revenu Québec — Form TP-1097 · Revenu Québec — Failure to file a notice of disposition by a non-resident vendor.
The central role of the notary at closing
The notary verifies your residency status, holds the required amount (25%/50%) in trust at closing, releases it only when the CRA and Revenu Québec certificates arrive, remits any amount due to the authorities and pays the balance to the seller. This protects the buyer from section 116 liability.
In Québec, the sale of real estate must go through a notary, and the notary orchestrates the withholding mechanics. Their typical steps:
- Verify the seller's residency status and require a declaration on the point in the deed of sale;
- Hold in trust the required amount (25%, increased for the depreciable portion) rather than paying it to the seller;
- Wait for the certificates of compliance from the CRA and Revenu Québec before any release;
- Remit to the authorities the amounts due per the certificates, then pay the balance to the non-resident seller.
This trust holdback protects the buyer — who, without it, would remain exposed under subsection 116(5) — and reassures the seller, who knows exactly what unlocks their funds. On a North Shore multi-unit building, it is the notary who coordinates the timeline between closing and the issuance of the certificates.
"Without a certificate of compliance, the purchaser may become liable, under subsection 116(5), to remit an amount of tax on behalf of the seller; the purchaser is then entitled to withhold that amount from the purchase price."
— Paraphrase of CRA Information Circular IC72-17R6 (section 116)How to plan ahead and sell your plex without a hold-up
Plan ahead by declaring your non-resident status at the offer stage, filing the notices of proposed disposition (T2062/T2062A with the CRA, TP-1097 with Revenu Québec) before closing, gathering acquisition cost, capital expenses and depreciation history, and engaging a notary and tax advisor early. The withholding stays in trust until the certificates arrive.
The difference between a smooth sale and months of frozen funds comes down to anticipation. Here is the path to follow for a non-resident owner of a plex on the North Shore:
- Declare your status early. Tell the buyer, the broker and the notary, right at the purchase-offer stage, that the seller is a non-resident.
- File the proposed disposition notice. Don't wait for closing: file the T2062/T2062A with the CRA and the TP-1097 with Revenu Québec as soon as the offer is signed, to start processing.
- Gather your numbers. Acquisition cost, capital expenses (major renovations), and above all the depreciation history claimed — that determines the recapture and the 50% portion.
- Engage the notary and tax advisor together. Coordinating the two processes (federal and provincial) and calculating the withholding calls for professionals used to non-resident files.
- Budget for the trust holdback. Accept that the withholding stays locked until the certificates arrive, and factor that delay into your cash-flow planning.
Selling to a direct buyer simplifies coordination
- A buyer used to non-resident files understands the withholding and isn't scared off by it
- No chain of uncertain buyers backing out over the tax complexity
- A realistic closing timeline aligned with CRA and Revenu Québec processing times
- Direct communication with your notary on the trust mechanics
For the other tax aspects of a sale, see our articles on capital gains when selling your plex, on CCA recapture, and our guide to the costs of selling an income property. To discuss your situation, reach us on the contact page.
This article sets out the general rules as of July 1, 2026. Rates, forms and deadlines can change; the tax rates applied to recapture vary with your situation. Consult a notary and a tax advisor, and check current processing times with the CRA and Revenu Québec for your specific case.
