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I left Canada in January, 2024. I have a house in Canada which was my Principal Residence for all the years, I lived in Canada. It was owner occupied by me & never rented by me.
Now in May, 2025 almost 1.5 years later, I want to sell my house in Canada as a Non Resident of Canada for tax purposes, but Citizen of Canada.
What are the Capital gains tax, I have to pay on it?
FMV - Fair Market Value of the house was around $ 700,000/- in January, 2024 when I left Canada.
The sale price of the house will be around $ 820,000/- in May, 2025.
So profit of $ 120,000/- on the house
The house was bought in 2005 for around $240,000/-. I am guessing this price is irrelevant and they will only see the FMV in January, 2024 , when I left Canada.
1. Do I pay Capital gains tax on the entire $120,000 because I am a non resident of Canada?
2. Do I pay Capital gains tax on 50% of the $ 120,000/- . So pay capital gains tax on $ 60,000/-, as residents normally do. Do Non residents also pay Capital gains only on 50% of the profit?
3. Or do I pay 25% withholding tax on the $ 120,000/- as Capital gains tax?
I have no other income or assets in Canada, besides this non rental house. What exactly is my tax obligations to Canada and the exact amount in Capital gains tax, I will owe on this house?
Sincerely,
Alex.
Hi Alex,
Thank you for your message and detailed background.
Since you became a non-resident of Canada in January 2024 and plan to sell your former principal residence in May 2025, here is how the Canadian tax rules will apply:
1. Principal Residence Exemption (PRE)
As you lived in the home from 2005 until your departure in January 2024, and never rented it out, you qualify for the Principal Residence Exemption on the capital gain accrued during your time as a Canadian resident.
This means the capital gain from 2005 to January 2024 is fully tax-exempt.
Only the gain from January 2024 to the sale date in May 2025 is subject to Canadian capital gains tax, since this occurred while you were a non-resident.
2. Capital Gain Calculation
- Fair Market Value at departure (Jan 2024): $700,000
- Sale price (May 2025): $820,000
- Capital gain as a non-resident: $120,000
- Taxable portion (50%): $60,000
- Estimated tax owing: 25% of the actual gain = $30,000
3. Section 116 Withholding Tax
Under Section 116 of the Canadian Income Tax Act, the buyer is required to withhold 25% of the gross sale proceeds if the seller is a non-resident and no Certificate of Compliance has been issued.
In your case:
- 25% × $820,000 = $205,000 would be withheld by the buyer and remitted to the CRA if no action is taken.
4. Form T2062 – Refund of Excess Withholding
To avoid this excessive withholding and receive a refund, you must file Form T2062 within 10 days of the closing date.
The purpose of this form is to:
- Report the actual taxable gain (i.e., the $120,000),
- Pay the applicable capital gains tax (25% × $120,000 = $30,000),
- Obtain a Certificate of Compliance from the CRA.
Once this certificate is issued, the buyer is authorized to release the excess withholding (i.e., $205,000 – $30,000 = $175,000) back to you.
5. T1 Section 116 Tax Return
After the sale, you must file a Canadian T1 non-resident return under Section 116 to report the capital gain and reconcile any taxes paid. This may result in a refund or balance owing.
Our Fees:
- Form T2062 & Certificate of Compliance: $1,100
- T1 Tax Return (Section 116): $350
- Total: $1,450 + disbursements