Selling or renting out property in your home country: the Canadian tax impact

What happens to your property when you become a resident?

Section 128.1 of the Income Tax Act covers people who become resident in Canada. You are treated as if you sold most property you own and bought it back at its fair market value (FMV). The CRA explains it simply: the FMV on the day you became a resident becomes your cost.

• This applies to property such as a flat, house, land, shares or jewellery abroad.
• Gains from before you arrived are not taxed in Canada.
• Losses from before you arrived do not count in Canada either.

The CRA says to keep a record of the FMV on the date you arrived. A written valuation, recent sale prices of similar homes, or a government valuation can help. Convert the value at the Bank of Canada rate on that day.

How do you report rent from a property abroad?

1. Add up the rent you received after your residency date, in Canadian dollars.
2. Subtract rental expenses, such as property tax, repairs, insurance, agent fees and mortgage interest.
3. Report it on Form T776, Statement of Real Estate Rentals. The CRA’s Guide T4036 says gross rent goes on line 12599 of your return.
4. If your home country taxed the rent, claim a foreign tax credit on Form T2209.

All five treaties on this site let the country where the property sits tax the rent. Canada also taxes it and gives the credit. See five tax treaties compared. If relatives live in it rent-free, there is no rent to report.

Example: renting out, then selling a flat

Arjun became a resident of Canada on June 1, 2025. He owns a flat in India. Its value on June 1, 2025 was the equivalent of $150,000 at that day’s Bank of Canada rate. He rents it out.

• If India taxed the gain, Arjun claims a foreign tax credit, up to the Canadian tax on that gain.
• The CRA’s Guide T4037 says to convert each amount at its own rate. Use the rate when you sold for the sale price, and the rate when you paid for each expense. The cost uses the rate when you acquired the property, which for Arjun is June 1, 2025.
• His 2025 arrival year needs no Form T1135. For 2026, the flat’s cost of $150,000 is over $100,000 and it is rented, so he files Form T1135.

The CRA’s 2025 capital gains guide gives a general inclusion rate of 1/2. Check the rate for the year you sell.

What changes when you sell?

• In Canada: report the gain or loss on Schedule 3 for the year you sell. Your cost is the value on your residency date, plus later improvements.
• In your home country: it may tax the sale and may require tax to be withheld. Rules vary, so check with its tax authority.
• Relief: treaties let the country where the property is located tax the gain. Canada then gives a credit for that tax, up to the Canadian tax on the gain.
• Bringing the money to Canada: moving sale money is not income, but banks may ask where it came from. See why your bank asks about the source of money.

Can a home abroad be your principal residence?

Sometimes. The CRA’s principal residence folio says a property outside Canada can qualify, depending on the facts, for years you are resident in Canada. You or your family must ordinarily live in it, and you designate it when you sell.

• Only one property per family unit can be your principal residence for each year. If you also own a home in Canada, you choose which one to designate.
• If you own a home mainly to earn rent and live in it only briefly, the CRA says it is generally not “ordinarily inhabited” by you.
• Years before you became a resident are covered by the cost reset, not the exemption.

Do you need Form T1135 for property abroad?

Form T1135 reports specified foreign property. The CRA says:

• You do not file it for the year you first became a resident.
• For a newcomer, the cost of foreign property is its FMV when you became a resident.
• You file if the total cost of your specified foreign property was over $100,000 at any time in the year.
• Personal-use property, such as a home used mainly by you or a related person, is not reported.
• A property rented out with a reasonable expectation of profit is reported. Vacant land is included even if it earns nothing.

Check your case with the T1135 checker. Filing T1135 does not replace reporting the rent itself.

Common mistakes

• Using the original purchase price. For property owned on arrival, use the value on your residency date.
• No proof of value. Get evidence close to your arrival date. It is hard to rebuild years later.
• Leaving rent off because it stays abroad. Rent is taxable in Canada wherever it is paid.
• Netting home-country tax off the income. Report the full amount and claim the tax as a credit.
• Mixing up exchange rates. Each amount uses the rate for its own date.

Country notes: India, the Philippines, and Sri Lanka, China and Nigeria.

Common questions

Sources

• Justice Laws: Income Tax Act, section 128.1 (becoming resident: deemed disposition and acquisition)
• CRA: Completing your return for newcomers
• CRA: Guide T4036, Rental income (Form T776)
• CRA: Guide T4037, Capital gains 2025
• CRA: Line 40500, Federal foreign tax credit
• CRA: Income Tax Folio S1-F3-C2, Principal residence (¶2.74, residence outside Canada)
• CRA: Questions and answers about Form T1135
• CRA: Form T1135, Foreign Income Verification Statement
• Canada–India tax agreement, signed January 11, 1996 (Global Affairs Canada treaty text)
• Finance Canada: Canada–Philippines tax convention, signed March 11, 1976
• Finance Canada: Canada–Sri Lanka tax convention, signed June 23, 1982
• Finance Canada: Canada–China tax agreement, signed May 12, 1986
• Canada–Nigeria tax agreement, signed August 4, 1992 (Global Affairs Canada treaty text)
• Bank of Canada: Exchange rates

Checked against these sources on October 10, 2026. Spotted something out of date? Tell us.