By Bader A. Chowdry, CPA, CA, LPA | Insight Accounting CPA

At Insight Accounting CPA in Mississauga, we provide comprehensive accounting, tax planning, and advisory services for businesses across the GTA.

Non-Resident Tax Filing Requirements in Canada: The Essential Guide for Foreign Property Owners and Businesses

By Bader Chowdry, CPA | Insight Accounting CPA | Published February 19, 2026

Introduction

Are you a non-resident of Canada who owns Canadian property or receives Canadian income? Understanding your tax obligations is critical to avoid penalties, interest charges, and potential disputes with the Canada Revenue Agency (CRA). At Insight Accounting CPA Professional Corporation, we specialize in helping international clients navigate the complex web of Canadian non-resident tax requirements.

Canada has specific tax filing obligations for non-residents that differ significantly from those of Canadian residents. Whether you are selling real estate in Toronto, receiving rental income from a Mississauga investment property, or earning dividends from a Canadian corporation, understanding Section 116 clearance certificates and withholding tax requirements is essential for compliance.

What Makes You a Non-Resident of Canada?

The CRA determines residency status based on several factors, not just citizenship or the amount of time spent in Canada. Key indicators include:

• Primary residential ties outside Canada
• Secondary residential ties, including personal property, memberships, and economic connections
• Significant residential ties to another country
• Habitual abode and permanent home location

If you maintain significant residential ties in Canada while living elsewhere, you may be considered a deemed resident or factual resident for tax purposes. This determination dramatically affects your filing obligations and tax rates. Our team at Insight Accounting CPA helps non-residents in the GTA clarify their precise tax status before addressing filing requirements.

Part I Non-Resident Tax Filing: The Basics

Income Tax Act Requirements

Under Section 2(3) of the Income Tax Act, non-residents must file a Canadian tax return if they:

• Earn income from employment performed in Canada
• Carry on business in Canada
• Dispose of taxable Canadian property

Taxable Canadian Property

Taxable Canadian property includes real estate, shares of private Canadian corporations, partnership interests, and certain other assets. When non-residents dispose of these assets, specific withholding and reporting requirements immediately apply.

The vendor must report this disposition on their Canadian tax return, regardless of whether any tax is actually payable. Failure to report can result in penalties of 5% of the balance owing, plus 1% per month for up to 12 months.

Section 116 Clearance Certificate: The Critical Step

What is a Section 116 Clearance Certificate?

When a non-resident sells taxable Canadian property (typically real estate), the purchaser is required to withhold 25% of the gross proceeds unless a Section 116 clearance certificate is obtained from the CRA. This certificate reduces or eliminates the withholding requirement.

The process ensures that the CRA can collect any taxes owing on the capital gain realized from the disposition. Without this certificate, purchasers face significant risk and will typically withhold the full 25%.

Form T2062: Applying for the Clearance Certificate

Non-residents must file Form T2062, “Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property,” within 10 days after the disposition. The form requires:

• Property description and sale price
• Original cost and adjusted cost base calculations
• Details of improvements and selling costs
• Estimated tax calculation on the capital gain

A payment or security acceptable to the CRA must accompany the application, typically representing 25% of the estimated capital gain. At Insight Accounting CPA, we prepare comprehensive T2062 packages that minimize withholding amounts while ensuring full compliance.

Tax Planning Strategies for Non-Residents

Timing Your Disposition

Strategic timing of property dispositions can optimize tax outcomes. Consider:

• Calendar year considerations: Capital gains inclusion rates and exemptions may apply
• Loss utilization: Timing dispositions to offset other realized gains
• Currency fluctuations: Exchange rate impacts on Canadian dollar reporting

Treaty Benefits

Canada has tax treaties with over 90 countries that may reduce withholding rates or provide other benefits. The Canada-U.S. Treaty, for example, contains specific provisions for cross-border real estate transactions and business income.

Understanding treaty provisions requires careful analysis of residency articles, property articles, and limitation of benefits clauses. Our expertise in cross-border tax matters ensures international clients maximize available treaty benefits.

Rental Income and Non-Resident Withholding

Section 216 Election

Non-residents earning rental income from Canadian property face 25% withholding on gross income. However, filing under Section 216 allows taxation on net rental income at graduated rates, often resulting in significant tax savings.

To make this election, non-residents must file Form NR6, “Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent from Real Property or Receiving a Timber Royalty,” before the first rental payment. The tenant or agent then withholds only 25% of the estimated net income rather than gross receipts.

NR4 Information Returns

Every year, Canadian payers to non-residents must file NR4 information returns reporting amounts paid and tax withheld. These slips form the basis for claiming foreign tax credits in the recipient’s home country.

Employment Income and Pension Income

Non-residents performing employment duties in Canada are generally subject to Canadian tax on that income. Similarly, Canadian pension and retirement income paid to non-residents faces withholding tax, typically at 15% or 25% depending on treaty provisions.

The old age security (OAS) and Canada Pension Plan (CPP) benefits have specific rules for non-resident recipients that our accounting team can clarify based on your specific circumstances.

The Role of AI in Non-Resident Tax Compliance

At Insight Accounting CPA, we leverage our proprietary Accounting Intelligence framework to streamline non-resident tax compliance. Our AI governance patent-pending technology helps identify:

• Optimal filing strategies across multiple jurisdictions
• Treaty benefit applications
• Currency conversion timing advantages
• Compliance risk indicators

This technology-enhanced approach ensures that international clients receive the precision and efficiency that modern tax planning demands.

Common Mistakes Non-Residents Make

Missing Section 116 Applications

Failing to file for a clearance certificate can tie up significant proceeds for months. The CRA processing time for T2062 applications typically ranges from 8 to 16 weeks.

Misunderstanding Residency Rules

Many individuals incorrectly assume they are non-residents when factual circumstances establish Canadian tax residency. Comprehensive residency analysis prevents costly re-assessments.

Ignoring Provincial Tax

Ontario imposes additional taxes on non-resident property dispositions in certain circumstances. Understanding these layers of taxation is essential for accurate planning.

FAQ: Non-Resident Tax in Canada

Q: How long does it take to get a Section 116 clearance certificate?

A: The CRA typically processes T2062 applications within 8 to 16 weeks, though complex cases may take longer. Planning your transaction timeline accordingly is crucial to avoid closing delays.

Q: Can I get back excess withholding if the Section 116 certificate shows lower tax owing?

A: Yes. Once you file your Canadian tax return for the year of disposition, you can claim refunds for any overpayment based on your actual tax liability and cost base calculations.

Q: Do I need to file a Canadian tax return if I only have withholding tax deducted?

A: Yes. Non-residents disposing of taxable Canadian property must file a Canadian tax return reporting the disposition, even if all tax was paid through withholding. This finalizes your Canadian tax obligations for that transaction.

Q: What happens if I do not file Form T2062 on time?

A: Late filing penalties may apply. Additionally, the purchaser may withhold 25% of gross proceeds indefinitely until a clearance certificate is obtained. This creates significant cash flow issues for sellers.

Q: Are principal residence exemptions available to non-residents?

A: Generally no. The principal residence exemption only applies to properties ordinarily inhabited by Canadian residents. However, transitional rules and treaty provisions may provide partial relief in specific circumstances.

Take Action: Book Your Consultation

Non-resident tax compliance requires specialized expertise. At Insight Accounting CPA Professional Corporation, we help international clients fulfill their Canadian obligations efficiently while optimizing their tax position.

Contact us today:

• Phone: (905) 270-1873
• Online: Book a consultation

Whether you are selling property in Mississauga, managing rental income in the GTA, or planning a cross-border business venture, our team provides the clarity and compliance you need.

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This article provides general information and should not be construed as tax advice. Non-resident tax situations are highly fact-specific. Contact Insight Accounting CPA for personalized guidance tailored to your circumstances.