What are Non-Resident Holdbacks When Selling Real Estate in Canada? 

Selling Real Estate in Canada: Non-Resident Holdbacks | One80 Law

What is a holdback?

A holdback is a term used to describe money “held back”, before being deposited in the seller’s account, as the sale of property is being closed. There are several reasons to do this, such as there might be defects with the property that need to be repaired, or items from the property that need to be removed, or tax consequences that need to be addressed before the final funds are dispersed to the seller.

The buyer can request the holdback to make sure the seller does what they’ve agreed to do as listed in the purchase agreement. The money is held in trust by either the buyer’s or the seller’s lawyer until the issue is remedied.

What is a non-resident holdback?

This is a specific type of holdback relating to people who are non-residents of Canada and selling their real estate in Canada.


Non-residents are subject to Canadian non-resident withholding tax on the sale of real estate. To make sure that the Canadian Revenue Agency (CRA) is able to recover the money it’s owed, the buyer of the property is required to withhold part of the sale price on closing. The money is held by either the buyer’s or seller’s lawyer in trust. The amount of money can be between 25% to 50% of the sale price (not the net sale proceeds), so it’s a considerable obligation to be aware of.

Typically the holdback is 25% of the purchase price, but this liability may increase to 50% where the real estate is depreciable property (such as a building used for rental or business purposes) or if the real estate was not held as capital property (for example, the seller held the property for speculative purposes). As a buyer or a seller, if you’re not sure of this process, speak to our lawyers at One80 Law Group to walk you through your obligations.

Without the holdback, the risk is that the non-resident seller could leave the country and not pay the taxes they owe. The holdback is a way for the CRA to recover the money they’re owed.

What should a buyer be aware of when buying from a non-resident?

Buying from a non-resident is an extra layer of paperwork that may delay matters or complicate your closing. If you are buying from a non-resident, your real estate lawyer will discuss the effect of this on your closing as early as possible, rather than leaving it until the last minute.

If there aren’t enough proceeds from the sale for the non-resident seller to pay the taxes they owe, the sale could fall through. If, for example, the agreed upon purchase price is a $600,000 sale, where the withholding tax is 25% of the sale price, this means that $150,000 is being held back by the buyer’s lawyer. If the seller has a $500,000 mortgage to then payout on closing, the transaction cannot close unless the seller can provide the additional funds. It’s important for both the buyer and the non-resident seller to be aware of this risk at closing.

What does the non-resident seller need to do?

The non-resident seller must notify the CRA of the sale and file a Certificate of Compliance, sometimes called a “Tax Clearance Certificate” within 10 days of the sale.

The CRA will then request payment of the amount of tax they’re owed and issue a Certificate of Compliance. This can take weeks to even months to issue, so be aware that this isn’t a quick process.

Once the Certificate of Compliance is issued, the balance of money held in trust can be released.

What can a non-resident seller do to make this process quicker?

A non-resident seller can (and should) apply for a proposed disposition from the CRA before they sell the property. Once you sell the property, you will apply for the actual Certificate of Compliance.

The seller should also make sure the closing date they agree to with the buyer is long enough to allow for the Certificate to be issued, ideally at least 90 days or more.

As you can see, the timing and financial issues of non-resident holdbacks can create complications for both buyer and seller. If you need help with the purchase or sale of a non-resident-owned property in Alberta or BC, speak to One80 Law Group for expert guidance today!