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If you are renting in Canada and do not own a house in Canada.Live in a rental apartment, not ownership house.
But you have an overseas personal use apartment. (Not rental)
If you sell that overseas apartment, do you get Principal Residence Exemption on it? Can you designate the overseas house as Principal Residence?
If you have to pay Capital Gains tax on it, is the price adjusted to Inflation or Consumer Price Index or something?
Say overseas house you bought in 2010 year for $100,000/- but now it's worth $250,000/- in 2025. And you sell it for $250,000/-
Do you pay Capital Gains Tax on $ 75,000/- (50% of $150,000 profit). Or the inflation is seen in the 15 years from 2010 to 2025 & the $100,000/- cost price of the house from 2010 is adjusted accordingly?
Regards.
Hi Karen,
Thank you for your question.
Yes, as a Canadian resident, you may designate a foreign property (such as an overseas apartment) as your principal residence for a given year, provided it was ordinarily inhabited by you or a family member during that time. This holds true even if the property is outside of Canada and even if you are living in a rental property in Canada.
If the property qualifies and is designated as your principal residence for all the years you owned it, then the Principal Residence Exemption (PRE) can eliminate the capital gain on its sale.
However, if the property was not your principal residence for the entire period, or if you owned another property that was also designated in the same years, then the exemption may be partial or unavailable, and capital gains tax may apply.
Regarding your question about inflation: Canada does not adjust the cost base of the property for inflation or CPI. So, using your example:
- Purchase Price (2010): $100,000
- Sale Price (2025): $250,000
- Capital Gain: $150,000
- Taxable Portion: 50% of $150,000 = $75,000
- This $75,000 is included in your taxable income for the year of sale.
Let me know if you’d like help determining whether your overseas property qualifies for the Principal Residence Exemption or if you'd like us to assist with the reporting.