Reporting Foreign Rental Income

All Canadians have a legal obligation to report their worldwide income, including all foreign rental income, to the Canada Revenue Agency (CRA). This means that any income generated from properties outside of Canada must be declared on your Canadian tax return. The CRA requires Canadian residents to report income from all sources, both domestic and international, to ensure a fair and equitable tax system. By understanding and adhering to these obligations, Canadian taxpayers can avoid penalties and ensure they are taking advantage of any potential tax benefits associated with foreign property ownership.

Do Canadians need to report foreign rental income to the CRA?

How do Canadians report foreign rental income on Form T776?

Reporting rental income from properties outside of Canada on Form T776 (Statement of Real Estate Rentals) is a process that mirrors the reporting of Canadian rental income, with a few key distinctions. When it comes to reporting foreign rental income, Canadian taxpayers must convert this income, as well as any associated expenses, into Canadian dollars. The conversion should be done using the Bank of Canada’s daily foreign exchange rates for the day the income was received or expenses were incurred. The primary difference lies in the address section, where the location of the foreign property is specified including its postal code.

For Canadian taxpayers with rental income properties outside of Canada, the Capital Cost Allowance (CCA) can still be claimed on their Canadian tax returns. The CCA is essentially a deduction for the depreciation of property used to generate income, and the rules for claiming it follow the same guidelines as for properties within Canada. Taxpayers must calculate the CCA based on the class of the asset and the applicable rate, using the asset’s cost in Canadian dollars after conversion from foreign currency.

When is Form T1135 required for foreign rental properties?

In addition to reporting requirements for the revenues generated by your rental property outside of Canada, you are also required to report the property on Form T1135, which is the Foreign Income Verification Statement. This form is required if the total cost amount of your specified foreign property exceeds $100,000 in Canadian currency during the tax year. The reporting deadline for Form T1135 is on or before the due date of your income tax return or, in the case of a partnership, the due date of the partnership information return, even if the income tax return (or the partnership information return) is not required to be filed. You can choose to use either the simplified reporting method or the detailed method for reporting your foreign rental income

For further information please contact Taxtron Support at 416-491-0333 or visit www.taxtron.ca