German rental income for Canadian residents
Key facts
- Treaty
- Canada–Germany Agreement of 19 April 2001, in force 28 March 2002
- Who taxes the rent first
- Germany — Art. 6
- Canadian method
- Foreign tax credit — Art. 23(1), Forms T2209 and T2036
- Canadian forms
- Rental statement (T776) in CAD; T1135 if foreign property cost exceeds CAD 100,000
- Depreciation at home
- Optional CCA, Class 1 at 4 %; cannot create or increase a rental loss
- Tax years
- Both calendar years
- Canadian deadline
- 30 April (filing and payment)
File the German return first
Rent from a flat in Germany is German-source income under §49 Abs. 1 Nr. 6 EStG, whatever your nationality. As a resident of Canada you file the non-resident return: Hauptvordruck ESt 1 C with one Anlage V per property, through ELSTER, at the Finanzamt where the property is located.
- No Grundfreibetrag: §50 Abs. 1 EStG taxes the profit from the first euro.
- Deduct German Werbungskosten, mortgage interest and AfA under German rules.
- Deadline for a self-filed 2025 return: 31 July 2026. If you missed it, file now — the late-filing surcharge only becomes automatic 14 months after year-end, at the end of February 2027.
- Treatment as a German resident under §1 Abs. 3 EStG is open if at least 90 % of your worldwide income is German-taxable, or if your non-German income stays below the Grundfreibetrag (reduced for some countries of residence). With a salary at home, neither test is usually met — but a retiree with little foreign income may qualify.
- Living outside the EU/EEA, the Finanzamt may ask you to name an Empfangsbevollmächtigter in Germany. Letters posted abroad count as delivered one month after posting.
Report the rent in Canadian dollars
Canadian residents report worldwide income, so the German rent and expenses are converted to CAD — at the Bank of Canada rate for the day, or the annual average where amounts arise throughout the year — and reported with the rental statement. The expenses follow Canadian rules. German AfA is not used: Canada allows capital cost allowance, normally Class 1 at 4 % declining balance for a rental building, with a separate class for a rental property costing $50,000 or more. CCA is optional and cannot create or increase a rental loss.
Credit the German tax — and do not waste it
Article 23 requires Canada to deduct German tax on the rent from Canadian tax. The federal credit is claimed on T2209 and the provincial one on T2036 (Quebec has its own system). The credit is limited to the Canadian tax otherwise payable on the net German income. The 15 % limit for non-business foreign tax does not apply to rent from real property, but unused non-business foreign tax cannot be carried forward or back. A large CCA claim lowers Canadian net foreign income, which can push the credit limit below the German tax actually paid — that excess is then only deductible, not creditable.
File T1135
A rental property abroad is specified foreign property. If the total cost of your specified foreign property exceeds CAD 100,000 at any time in the year, Form T1135 is due with your return; a simplified method applies below CAD 250,000. Penalties for missing it are separate from any tax due.
Example: the same flat, taxed in Germany and Canada
Illustrative only. Every country page uses the same German flat so you can compare. German side: tax year 2025, non-resident return, no other German income.
| Rent received incl. operating-cost advances | €12,000 |
|---|---|
| Running costs | − €2,000 |
| Mortgage interest | − €3,000 |
| AfA, 2 % of €100,000 building basis | − €2,000 |
| German rental profit | €5,000 |
| German income tax (§50 EStG, no Grundfreibetrag)Soli: 0 | €933 |
Ontario resident, 30 % combined marginal rate, €1 = CAD 1.50, German tax for the year known at filing.
| Net rent before CCA (€7,000) | CAD 10,500 |
|---|---|
| Canadian tax at 30 %, no CCA claimed | CAD 3,150 |
| Credit for German tax (€933) | − CAD 1,400 |
| Canadian tax still due | CAD 1,750 |
| If CCA of CAD 7,000 is claimed insteadcredit capped at 1,050; CAD 350 of German tax lost as credit | Canadian tax CAD 1,050 |
Claiming CCA saves Canadian tax now but can strand part of the German tax. Run the numbers both ways before choosing the CCA amount.
Mistakes specific to Canadian residents
Copying the Anlage V result into the rental statement
German AfA and Canadian CCA differ in rate, method and currency. Build the Canadian figures from the underlying income and expenses.
Forgetting T1135
A let property never counts as personal-use property. Above CAD 100,000 of cost, T1135 is required even if the flat makes no profit.
Ignoring a later German reassessment
The credit belongs to the year of the income, not the year paid. If Germany changes the tax, adjust the Canadian credit for that year.
When this page is not for you
- Quebec residents, who also file a separate provincial return with its own credit.
- Property held through a corporation, partnership or trust.
- The year you sell, short-term letting, and the year you move to or from Canada.
In these cases, or when amounts are large, ask a Steuerberater and a tax adviser in your country of residence.
Common questions
How is German rental income taxed for Canadian residents?
Germany taxes the rent first through the standard non-resident return (ESt 1 C with Anlage V), from the first euro. Canada taxes the same rent as part of your worldwide income, computed in Canadian dollars under Canadian rules, and credits the German tax on Form T2209 (and the provincial form) up to the Canadian tax on that income. Unused credit on rental income cannot be carried to other years, so how much capital cost allowance you claim changes the result.
Is the German Solidaritätszuschlag a creditable tax?
The treaty lists it among the German taxes covered. For a single flat it is usually zero because of its threshold.
Can Germany give me the tax-free allowance as a Canadian resident?
Only through the §1 Abs. 3 EStG option: at least 90 % of your worldwide income must be German-taxable, or your non-German income must stay below the Grundfreibetrag, certified by the CRA. With Canadian employment income neither test is usually met.
Last reviewed: by Yann Lephay.