Canada Relocation Update: 2025 Non-resident Withholding Rate

Canadian non-residents selling property without a compliance certificate will face a higher withholding rate of 35%, up from the current 25%, as announced in the Budget 2024 presented in April.

During relocation transactions, it is standard practice for the seller who is not a resident (such as a relocation management company from outside Canada) to acquire a Section 116 Clearance Certificate to determine if there are any outstanding capital gains tax or income tax obligations. If this certificate is not provided before the closing, the seller's attorney is required to retain a portion of the sale proceeds until the Clearance Certificate is issued by the CRA. Starting from January 1, 2025, the withholding rate will be set at 35% of the property's value for closings.

Even though the amendments to the Income Tax Act and its regulations have not been finally voted on, it is expected that they will be passed soon. It is advisable to start preparing for your 2025 Canadian closings by considering when the transferee and their family will be leaving the country, and by making sure that the necessary clearance paperwork is submitted promptly to prevent any delays in the release of sales proceeds, which could potentially result in a lengthy waiting period for their return.

Canadian Non-Residents will be impacted

To learn more about the impact to your relocation programming, contact us.

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