Canada resident tax on overseas rental property

Question

I am moving to Canada, BC this year and understanding taxation is rather difficult to understand. I have an apartment in Europe which I am meaning to rent out. The tax in my country on rental property is 10% flat.

As I understand, in Canada I have to pay tax on my worldwide income as a resident. So how much am I required to pay in taxes for renting out my European apartment? I am not talking about deductions, but just flat percentage rate.

EDIT:

My salary will be approx 135 000 CAD a year and around 50 000 CAD bonuses. I want to rent my apartment for approximately 1000 CAD a month with ~17 CAD in mortgage payments each month.

Answer 1

Your net income from the rental property will effectively be taxed as additional regular income, with two important points:

• You can claim expenses from, for example, mortgage interest (but not the mortgage principal payments), or repairs & maintenance, etc. - this will reduce your net rental income
• If you pay foreign taxes in your home country (you will almost certainly still need to file a return there and pay taxes on your rental income), you can likely use those foreign taxes to reduce your Canadian taxes paid. How this will work will depend on exactly what country the property is in (because the treatment is determined by the tax treaty between Canada and your country).

So per your numbers above, if you want to estimate the tax impact, add 12k annually to your income, and potentially offset with foreign taxes, if applicable.

Answer 2

It depends on how much money you will make after deductions on your rental property. It is pretty straightforward if you use TurboTax - you can walk through it.

Another expensive option is to have a tax preparer create your return, it will be about $1500 + to have someone submit that return for you.

Also, you will need to fill out T1135 to submit to the CRA is well. It is pretty simple to fill out as well.