The apartment you kept in Brazil still brings in rent, and now two countries have a right to tax that money. Brazil, because the property is there. Canada, because you live here.
Many people settle it by picking one. They report in Brazil and assume the treaty excuses them in Canada, or they report in Canada and forget the Brazilian withholding. Neither is right. The treaty does not ask you to choose: it has you report in both countries and use the tax paid in Brazil as a credit in Canada.
This guide shows how that works for rent, for a sale and for the foreign property form, under the rules in force in 2026.
- Rent is taxed in both countries, but not twice. Brazil withholds 15% of the net rent paid to a non-resident. Canada taxes the same rent and credits what was paid in Brazil.
- On a sale, each country measures a different gain. Brazil starts from what you paid, in reais. Canada starts from what the property was worth on the day you became a resident, in Canadian dollars.
- A rented property goes on the T1135. The form applies from your second year as a resident, once the cost of your foreign property exceeds CAD 100,000.
First: are you still a resident of Brazil?
The answer changes the whole Brazilian side. If you filed the Declaração de Saída Definitiva (Brazil’s final exit return), you are a non-resident for the Receita Federal and this guide applies to you. If you did not, you remain a Brazilian resident for your first 12 months abroad and are only treated as a non-resident from the 13th month.
While you are still a resident of Brazil, the rent goes through carnê-leão (Brazil’s monthly self-assessment) and the annual Brazilian return, as it always did.
Canada has no such question. From the day you become a resident, you report your worldwide income, and that includes the property in Brazil.
Who taxes what under the treaty
The Canada–Brazil Tax Convention, signed in 1984 and unchanged since, settles it this way:
Income | Brazil | Canada |
Rent | May tax it, because the property is there (Article VI) | Taxes it as the country of residence and credits the Brazilian tax (Article XXII) |
Gain on sale | May tax it (Article XIII) | May also tax it, with the same credit (Article XXII) |
In practice, Brazil collects first and Canada collects the difference, if any. The credit never exceeds the Canadian tax on that same income. When the Brazilian tax is higher, Canada charges nothing, but it does not refund the excess either.
Rent: the Brazilian side
For a non-resident, tax on rent is withheld at source and settles the obligation in Brazil. There is no carnê-leão and no annual Brazilian return because of that rent.
- Rate: 15%. The 25% rate applies only to residents of low-tax jurisdictions, and Canada is not on that list.
- Base: the net rent. Before the 15% is applied, documented property tax (IPTU) and fees, condo fees and collection costs, such as the rental agency’s fee, are deducted.
- Who pays it: your attorney-in-fact in Brazil, usually the rental agency or a relative holding a power of attorney. It is paid by DARF under code 9478.
Keep the withholding receipts. They are what proves, on the Canadian side, how much tax you have already paid.
Rent: the Canadian side
The same rent goes on your Canadian return as rental income. Expenses follow Canadian rules, not Brazilian ones, and the result has to be in Canadian dollars.
Exchange rate. The CRA’s rule is the Bank of Canada rate on the day each amount was received. When the currency is not volatile, the CRA accepts an average rate for the period, which makes monthly rent much simpler.
Credit for the Brazilian tax. The 15% withheld in Brazil becomes a foreign tax credit, on form T2209 for federal tax and T2036 for provincial tax in Ontario. There is a 15% cap on foreign tax on investment income, but it does not apply to real estate: all the tax paid in Brazil on the rent can be used. Any part that does not fit in the year is not carried forward.
An example with round numbers and an illustrative rate of CAD 0.25 per real:
For the year | Amount |
Gross rent (R$3,000 a month) | R$36,000 / CAD 9,000 |
IPTU and condo fees (R$600 a month) | R$7,200 / CAD 1,800 |
Tax withheld in Brazil (15% of R$28,800) | R$4,320 / CAD 1,080 |
Canadian tax on CAD 7,200 at a 30% marginal rate | CAD 2,160 |
Payable in Canada after the credit | CAD 1,080 |
The rent was taxed in both countries, but the total came out the same as if the property were in Canada.
Selling: one property, two different gains
This is where most people are surprised. Brazil and Canada measure the gain differently, and the two numbers almost never match.
Brazil (non-resident) | Canada | |
Cost of the property | What you paid, in reais, with no indexation after 1995. Without proof, the cost is zero | Fair market value on the day you became a resident of Canada |
Currency | Reais | Canadian dollars: cost at the rate on your arrival date, proceeds at the rate on the sale date |
Tax | 15% on gains up to R$5 million, with 17.5%, 20% and 22.5% brackets above that | Half of the gain is added to your income and taxed at your normal rate |
Exemptions | None. The single-property exemption up to R$440,000 and the 180-day reinvestment exemption are for residents only | Principal residence exemption, in narrow cases (see below) |
Where it is reported | The Receita Federal’s GCAP program | Schedule 3 of your return, with land and building shown separately |
Why the Canadian cost is the value on arrival. When you become a resident, the CRA treats you as having sold and bought back everything you owned, at that day’s market value. Canada only taxes the growth that happened after you arrived. That is why it pays to keep an appraisal of the property as of your moving date, from an agency or a broker.
Who pays the tax in Brazil. The law places the responsibility on the buyer when the buyer lives in Brazil, but some Receita Federal pages refer to the seller’s attorney-in-fact. Settle it in writing in the contract, before the deed, so the tax does not fall between the cracks.
An example shows the effect of the credit. An apartment bought for R$300,000 in 2010 was worth R$600,000 when its owner moved to Canada and sold for R$700,000 in 2026.
- In Brazil, the gain is R$400,000 and the tax is R$60,000.
- In Canada, the gain is the difference between R$700,000 converted on the sale date and R$600,000 converted on the arrival date. It is a fraction of the Brazilian gain, and depending on the exchange rate it can even be zero.
- The credit wipes out the Canadian tax on this sale, but refunds nothing of the extra paid in Brazil.
To see how half of the gain is added to your income, read our guide to capital gains tax in Canada.
What if the property was your home?
A property abroad can be your principal residence for the CRA, as long as you, your spouse or your children lived in it. The conditions are narrow:
- Only the years in which it was the family home and you were already a resident of Canada count.
- Each family has one principal residence per year. If you already own a home here, the two compete for the same years.
- A property kept mainly to earn rent generally does not qualify.
- The designation must be reported on Schedule 3 and form T2091 in the year of the sale. A late designation costs CAD 100 for each month late, up to CAD 8,000.
For most people who moved to Canada and rented out the home they left in Brazil, the exemption does not apply. It is worth checking before you sell.
The T1135 foreign property form
The Brazilian property also appears in Canada on an information form, the T1135, even in years when it produces no tax.
- When it is required: when the total cost of your foreign property exceeds CAD 100,000 at any time in the year. A rented property counts. Personal-use property does not, and the test is personal use above 50%.
- When it starts: in your second year as a resident. It is not required in the year you arrive.
- What cost to report: fair market value on your arrival date, the same figure used for a sale.
- Late-filing penalty: CAD 25 a day, minimum CAD 100 and maximum CAD 2,500 per year, even when no tax is owed.
The most common mistakes
- Reporting the rent only in Brazil, assuming the treaty excuses Canada.
- Applying the 15% to gross rent and paying tax on IPTU and condo fees.
- Using the purchase price as the Canadian cost instead of the value on arrival.
- Converting everything at the exchange rate on the day the return was prepared.
- Counting on Brazil’s single-property exemption as a non-resident.
- Forgetting the T1135 in the second year.
Every case has its own details: a mortgage, an inheritance, a property owned by more than one person or held in a company. Our tax preparation team handles the Canadian side, and a conversation with our team helps organize a sale before the deed.
Frequently Asked Questions (FAQ)
Yes. A Canadian resident reports worldwide income, so the rent from the property in Brazil goes on the Canadian return. The tax withheld in Brazil is not lost: it becomes a foreign tax credit and is deducted from the Canadian tax on that rent.
No. For a non-resident, the base is the net rent. Before the 15% is applied, documented IPTU and property fees, condo fees and collection costs are deducted. Your attorney-in-fact in Brazil withholds it and pays by DARF under code 9478.
The fair market value of the property on the day you became a resident of Canada, converted at that day’s exchange rate. The price you originally paid only matters for the Brazilian calculation.
No. The Receita Federal is explicit that the exemptions and reductions available to residents do not apply to a non-resident’s capital gain. That includes the single-property exemption up to R$440,000 and the 180-day reinvestment exemption.
If it is rented out and the total cost of your foreign property exceeds CAD 100,000 at any time in the year, yes. Personal-use property is excluded. The T1135 is not required in the year you become a resident, only from the following year.
