Revenue Canada requires that any person doing business and earning income in Canada must pay Canadian income tax. To ensure a non-resident pays the required tax on any income or gain, a system of withholding taxes is used. Should the home be sold at a gain, the purchaser would be required to withhold from the gross proceeds a percentage of 25 % of the proceeds and remit them to Revenue Canada.

There are certain mechanisms available to reduce or eliminate this tax requirement, but they are restrictive and must be addressed case by case. If these mechanisms do not work, when a Canadian tax return is filed the seller will receive a refund of all the taxes paid upfront less the taxes owed on the actual gain. Due to each individual case we would recommend speaking to a tax specialist.