Canada’s budget would cut withholding on non-resident companies’ sales
Michael Mai
Buyers would withhold 15% of the price, not 25%, when a non-resident company sells taxable Canadian property (30%, not 50%, for some assets); the proposal, for sales from 2027, changes no other seller's rate.
Canada’s federal budget, released in Ottawa on 5 November 2026, proposes to cut the share of the price that a buyer must withhold when a non-resident company sells taxable Canadian property: from 25% to 15%, or from 50% to 30% for some assets.
The change is a proposal set out in draft legislation, and it would apply to sales on or after 1 January 2027. The draft would not change the rates for other non-resident sellers, an individual for example.
How the withholding works now
Canada taxes a non-resident’s income and gains from selling taxable Canadian property, which the budget’s tax annex describes as property with a significant connection to Canada, such as Canadian real estate, resource properties and certain shares or interests that derive their value mainly from them.
To collect the tax, section 116 of the Income Tax Act generally makes the buyer liable to pay the Canada Revenue Agency (CRA) an amount measured by the price, unless the seller holds a certificate of compliance or the buyer, after reasonable inquiry, had no reason to believe the seller was not resident in Canada. An earlier article sets out the steps for a home sale.
The annex says a buyer must generally withhold 50% of the price for specified property, a class where a sale can produce fully taxable ordinary income, such as depreciable property and real property held as inventory, and 25% for other capital property. A seller obtains a certificate by paying 25% of the gain, posting security or showing that no tax is owing; for specified property, an amount the CRA accepts.
Who would get the lower rates
The annex gives the reason: the rules generally do not account for the different tax rates that different taxpayers pay, so the amount withheld can exceed the tax a corporate seller would owe.
| Seller | Property | Buyer withholds now | Proposed |
|---|---|---|---|
| Non-resident corporation | Capital property other than specified property | 25% of the price | 15% of the price |
| Non-resident corporation | Specified property | 50% of the price | 30% of the price |
| Other non-resident seller, such as an individual or a trust | Either kind | 25% or 50% | No change in that part of the draft |
A corporate seller would also pay 15% of the gain, not 25%, to obtain a certificate for capital property other than specified property.
The draft amendments to section 116 give the seller the lower certificate figure only where the seller is a corporation. For the buyer’s withholding, the lower figures also apply where the buyer, after reasonable inquiry, had no reason to believe the seller was not a corporation. No provision in the taxable Canadian property part of the draft changes the rates for any other seller.
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A rollover exemption, and a longer anti-avoidance rule
The budget also proposes a change that is not limited to companies: the draft refers to a non-resident person, not to a corporation. Where a seller and a buyer elect under section 85 of the Act to transfer property at less than market value, which defers the gain, the withholding and remittance requirements would not apply to the seller or the buyer.
The exemption would require, within 30 days of the sale, that the election form be filed, that the buyer conclude after reasonable inquiry that the sale puts no amount into the seller’s Canadian taxable income, and that the buyer notify the CRA. It would fall away if the election were later amended so that income arises.
An existing rule, section 69(11), denies the deferral if the property is disposed of, or arrangements to dispose of it are made, within three years and one of the main purposes of the series was to obtain an exemption from Canadian tax on that later disposition, for example under a tax treaty.
For such rollovers by non-residents the period would be five years, and a later disposition of a property that principally derives its value from the transferred property would also be caught.
What it means for a Vietnamese owner
The rules turn on tax residence in Canada, not on nationality. A Vietnamese citizen who is not resident in Canada for tax and sells taxable Canadian property meets them as follows:
- In their own name. No rate changes in the draft: the buyer still withholds 25% of the price, or 50% for specified property, unless the seller holds a certificate.
- Through a non-resident company. The lower rates of 15% and 30% would apply.
- By a section 85 transfer. No withholding would be needed if the conditions are met, but the proposal would deny the deferral if the property is later disposed of within five years, not three, and one of the main purposes was an exemption from Canadian tax.
Until Parliament enacts the change, the rates in the Act stand. The draft would apply to sales after 2026 whenever enacted; the documents read do not say how a sale closing early in 2027, before enactment, would be treated.
What this article has not established
Whether a bill carrying the change has been introduced since 5 November is not established: the parliamentary bill-tracking page returned an error. The draft text is in a notice of ways and means motion that refers to its clauses as draft legislative proposals.
Tax treaties, including any between Canada and Vietnam, and provincial taxes were not read.
The same annex also proposes to deny the tax deferral on trust distributions to corporations or partnerships with non-resident owners, from 5 November 2026, and invites views on Common Reporting Standard rules by 31 December 2026.
The Canada Growth Incentive exemption is limited to individuals resident in Canada throughout the year of the claim, and the budget presents Canada Strong Notes as a product for Canadians; the documents read do not say whether non-residents could buy them.
Any bill would show whether the lower rates stay limited to corporations and whether sales from 1 January 2027 are still the start date.
