A section 116 clearance certificate is the Canada Revenue Agency document confirming that a non-resident's disposition of taxable Canadian property has been reported and that the estimated Canadian tax has been paid or secured. Where no certificate is obtained, the purchaser is generally required to withhold a percentage of the gross purchase price and remit it to the CRA, and the purchaser can be personally liable for failing to do so.
The non-resident seller applies for the certificate, typically by filing the prescribed form with a payment or security covering the estimated tax on the gain. The standard withholding is commonly 25% of the proceeds, with a higher rate for some property types, until the certificate is issued. The process is the procedural backbone of non-resident sales of Canadian real estate and other taxable Canadian property, and its timing often affects how a closing is structured.