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My question is: Canadian-specific
QUESTION: I have a holiday property in Portugal which I might sell. If I make a capital gain, I would have to pay Portuguese capital gains tax at the rate of 25% of the net gain x50%, The net gain in Portugal would be: the price received, minus 1.33 times the cost. I have owned this condo since 1993, and it was my principal residence at least until 1996, when I bought a condo in Canada. I have always been a Canadian resident. I assume that the gain would be taxable in Canada, and that I would get a credit for taxes paid to Portugal. Is this true, and if so on what basis?
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david ingram replies:
I cannot comment on the Portuguese tax capital gains tax. I have taken several restaurant business returns from Portugal and converted them to Canadian and added the income and claimed the foreign tax credits and that I can do and comment on.
Your condo can be tax free from Canadian tax from the day you bought it if you are willing to pay tax on your Canadian Condo when you sell it (only on the time period you owned both however).
That would not seem to make much sense to me because you apparently have to pay capital gains tax in Portugal anyway and you would then be paying tax on both units.
You need to get hold of form T2091 which is what you use to calculate the tax on a personal building like this where you have used it as a principal residence as well.
After you have determined the taxable amount, you will use the foreign tax paid to Portugal as a foreign tax credit on schedule 1 of your Canadian return.
I or my associates would be glad to look after it when the time comes by email, snail mail, fax or courier.
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