This Seller Owed $69K on Closing—Here’s Why

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There’s a rule in Canadian tax law that catches a lot of people off guard when selling real estate.

If a seller is not a resident of Canada for tax purposes, the buyer is legally required to hold back a portion of the purchase price and wait for clearance from the CRA before releasing those funds.

This is called a Non-Resident Holdback—and it’s not optional.

The standard holdback (in simple terms) is:

• 25% of the sale price for personal-use property
• 50% for income-generating or depreciable property (like rentals)

The logic is simple: the CRA wants to make sure it collects any taxes owed before the seller’s money leaves the country. But that process is anything but quick.

The seller must apply to the CRA for a Certificate of Compliance, and until that’s issued, the holdback stays put—either in a lawyer’s trust account, or directly with the CRA.

And it can take months.

Plus the holdback is based on sale price, not profit. So even if there’s little to no gain, the amount withheld can be substantial.

Now imagine this…

I once had a non-resident file where everyone was on the same page—seller, Realtor, lawyer. The holdback wasn’t a surprise.

But when we got the mortgage payout and did the math, it turned out the seller would need to bring in $69,000 just to close.

And we were seven days away.

Thankfully, they had the funds. But if they didn’t, they would’ve been in breach.

That experience stuck with me.

Since then, I’ve always encouraged both clients and their Realtors to get us involved earlier.

We now run the numbers before a listing goes live—so the seller knows what’s coming, how long it will take, and how much cash may be needed to get the deal closed.

This is one of those things that’s easy to miss—until it’s a big problem.

So if your seller has ties outside Canada, or hasn’t filed taxes here in a while, don’t wait. Raise the flag early. Refer them to a lawyer and accountant to confirm status and equity.

It’s the best way to protect the deal—and your client.