Canadian Taxes on Costa Rica Property: T1135, Rental Income and Selling Your Nosara Home (2026)
Canadian owner of a Nosara home? T1135 rules, CRA penalties, rental income credits, capital gains and departure tax, from CRA sources.
If you are a Canadian resident who owns, or is about to buy, a home in Nosara, Canadian taxes on Costa Rica property come down to three moments: the years you own it, the years you rent it, and the day you sell it (or leave Canada). The rules are not hard once you see them laid out, but the penalties for getting the paperwork wrong are real, and most of them apply even when you owe no tax at all. This guide walks through each moment using the Canada Revenue Agency's own published rules, so you can sit down with your accountant knowing what to ask.
Key insight: For Canadian owners, the most common expensive mistake is a missed form. The T1135 can trigger penalties on a property that earned nothing.
This is a planning guide, not tax advice. Your situation (province, ownership structure, how much you rent, whether you plan to emigrate) changes the answer, so confirm everything with a Canadian accountant who handles foreign property and a Costa Rica accountant for the local side. For the purchase process itself, start with our guide to buying property in Nosara as a Canadian and the Nosara buyer's guide.
Is There a Canada Costa Rica Tax Treaty?
This is the first question most Canadian buyers ask, and the answer surprises people. According to Canada's Department of Finance, Canada and Costa Rica signed a Tax Information Exchange Agreement in San José on August 11, 2011, and it entered into force on August 14, 2012. That agreement lets the two tax authorities share information. It is not a comprehensive income tax treaty that divides taxing rights between the countries, and we did not find one listed in the Department of Finance's records.
What that means in practice:
- Costa Rica taxes income from Costa Rica property under its own rules, whether you live there or not.
- Canada taxes its residents on worldwide income, including rent and gains from a Nosara home.
- Relief from double tax comes from Canada's foreign tax credit, claimed on your own return.
- Information flows both ways. The exchange agreement exists precisely so the CRA can ask Costa Rica about Canadian residents' holdings there.
💡 Key insight: There is no treaty to lean on, and there is an information sharing agreement. Assume the CRA can find out about your Nosara property, and file accordingly.
The T1135: Do You Have to Report Your Nosara Property?
Form T1135, the Foreign Income Verification Statement, is where most Canadian owners stumble. The CRA's T1135 page says Canadian resident individuals must file it if, at any time in the year, they held specified foreign property with a total cost of more than $100,000. The threshold is based on cost (generally your adjusted cost base), not current market value. So a home bought years ago for less than it is worth today is measured at what you paid.
The personal-use exception
Here is the rule that decides whether your Nosara home is on the form at all. The CRA's T1135 questions and answers page says property used primarily for personal use, which the CRA defines as more than 50% personal use, is personal-use property and is excluded. A vacation home used only by you and your family is not reported.
The CRA gives worked examples on that same page that map neatly onto Nosara situations:
- A condo rented for eight months with a reasonable expectation of profit and used personally for four is specified foreign property, so it is reported.
- A condo rented only to recover expenses, with no reasonable expectation of profit, is treated as personal-use property and excluded.
- For a multi-unit property where most units are rented for profit and the units are roughly the same size, the CRA says the entire cost is reported.
That last example matters in Nosara, where many buyers purchase a main house with a casita and rent the casita. If you are thinking about that model, read our piece on adding a casita to a Nosara property and ask your accountant how the CRA's unit test applies to your layout.
Simplified vs. detailed reporting
The CRA's Q&A page explains two tiers:
| Total cost of specified foreign property | Which part of T1135 | What you report |
|---|---|---|
| Over $100,000 but under $250,000 all year | Part A (simplified) | Tick a box for each property type |
| $250,000 or more at any time in the year | Part B (detailed) | Each property, country, cost, income, gain |
Most Nosara rental homes will land in Part B on cost alone. Remember that other foreign assets count toward the same total: US brokerage accounts, foreign bank accounts and shares of non-resident corporations all add up with the house.
Deadline and penalties
According to the CRA's Foreign Income Verification Statement page, individuals file the T1135 by April 30, or June 15 if you or your spouse carried on a business. The CRA's table of penalties sets out what happens if you miss it:
| Situation | Penalty (per the CRA table of penalties) |
|---|---|
| Late filing | $25 per day for up to 100 days, minimum $100, maximum $2,500 |
| Knowing failure or gross negligence | $500 per month for up to 24 months, maximum $12,000 |
| Ignoring a CRA demand to file | $1,000 per month for up to 24 months, maximum $24,000 |
| Still unfiled after 24 months | Additional 5% of the cost of the foreign property |
The CRA also says your reassessment period is extended by three years if you did not report income from specified foreign property and did not file the T1135 on time. That keeps the whole return open longer, not just the rental line.
💡 Key insight: The T1135 is an information return. You can owe it in a year when the property lost money, and the penalty clock runs either way. Put the deadline in your calendar the year you start renting.
Renting Your Nosara Home: Taxed in Both Countries, Credited Once
If you rent your home in Playa Guiones, Playa Pelada or Garza, the income is taxed first in Costa Rica and then reported in Canada.
The Costa Rica side
PwC's Costa Rica tax summary says individual landlords report total rental income without deducting actual expenses, and the income is "subject to a 15% tax rate, with a predetermined 15% of deductible expenses." In plain terms, Costa Rica taxes 85% of your gross rent at 15%.
Short-term rentals also carry consumption tax questions. Costa Rican outlet El Observador reported that Hacienda added Airbnb, HomeAway and VRBO to its list of cross-border digital services subject to 13% IVA, and Airbnb's newsroom says the platform registered with Hacienda in 2023 to collect and remit IVA. How IVA applies to your own lodging income is a question for your Costa Rica accountant; our Nosara rental income tax guide goes deeper on the local filings.
Costa Rica's municipal property tax is also an ongoing cost. Ley 7509, Article 23, sets it at 0.25% of the property's registered value, collected by the municipality. Larger homes may also face the luxury home tax, covered in our impuesto solidario guide.
The Canadian side
On your Canadian return, foreign rent goes on Form T776, the same statement used for Canadian rentals. Unlike Costa Rica's gross-based system, Canada lets you deduct actual expenses. Canadian tax guides such as MoneySense and Taxtron list the usual deductible items for foreign rentals: property tax, management fees, insurance, utilities, repairs and interest, with everything converted to Canadian dollars. Taxtron notes the CRA expects conversion at the Bank of Canada exchange rate for the date of each transaction (or an accepted alternative source).
Then comes the credit. The CRA's line 40500 page says you can generally claim a federal foreign tax credit if you were a Canadian resident and included foreign income you paid tax on. The credit is calculated on Form T2209 and is limited, country by country, to the lesser of the foreign income tax you actually paid or the Canadian tax otherwise payable on your net income from that country.
A worked example
These figures are an example only, using round numbers and the rates sourced above.
| Line | Example amount (USD) |
|---|---|
| Gross rent collected | $40,000 |
| Costa Rica taxable base (85% of gross) | $34,000 |
| Costa Rica income tax at 15% | $5,100 |
| Actual expenses (management, cleaning, utilities, repairs, 0.25% property tax) | $22,000 |
| Net rental income for Canadian purposes, before CCA | $18,000 |
Costa Rica's effective rate in this example is 12.75% of gross, regardless of what you spent. Canada taxes the much smaller $18,000 net (less any capital cost allowance you claim). If the Canadian tax on that net is less than $5,100, the foreign tax credit is capped at the Canadian amount and the extra Costa Rica tax is not credited. High-expense, low-margin rentals are where this cap bites.
💡 Key insight: Costa Rica taxes your gross, Canada taxes your net. The leaner your rental margin, the more likely some Costa Rica tax goes uncredited. Run the numbers before you buy, not after the first tax season. Our Nosara vacation rental net income guide breaks down the expense side.
Owning Through a Costa Rica Corporation
Many Nosara properties are held in a Costa Rica SA or SRL, and many buyers acquire them by purchasing the shares. That structure has Canadian consequences worth raising early:
- The CRA's T1135 Q&A lists shares of non-resident corporations as specified foreign property. The personal-use carve-out describes property you use, and an accountant will need to look at whether shares of a company that owns your vacation home are treated differently from owning the home directly.
- If the corporation qualifies as a foreign affiliate, a different information return (Form T1134) may apply instead.
- Rent earned inside a corporation raises separate Canadian rules for foreign corporate income.
A corporation can still be the right choice. Make the ownership decision with your Canadian accountant involved as well as your Costa Rica lawyer. See our guides on using an SA or SRL to buy in Nosara and buying the corporation versus a title transfer.
💡 Key insight: A structure chosen for Costa Rica convenience can create Canadian filing work. Ask both advisors before you sign, because unwinding a structure later costs more than choosing well.
Selling Your Nosara Property as a Canadian
Costa Rica capital gains
PwC's Costa Rica summary says capital gains on real estate are taxed at 15%, and Law 9635 allows a 2.25% rate on the sale price under certain conditions for the first sale of each asset after the law took effect on July 1, 2019. PwC also says sales of assets owned by non-residents "should be subject to a 2.5% tax," withheld by the buyer when the buyer is a local taxpayer. Which rule applies depends on your residency status and purchase history, so get a Costa Rica tax opinion before listing. Our Costa Rica capital gains guide covers the local mechanics.
Canadian capital gains
Canada taxes the same gain. The Prime Minister's Office announced on March 21, 2025 that the proposed increase to the capital gains inclusion rate was cancelled, so the existing one-half inclusion rate continues to apply. Your gain is calculated in Canadian dollars, which means currency movement between purchase and sale can create a gain or loss of its own. Costa Rica tax paid on the sale feeds into the foreign tax credit, subject to the same lesser-of limit.
Can a Nosara home be your principal residence?
Possibly. CPA Canada and several Canadian advisory firms note that a seasonal home outside Canada can be designated as a principal residence for years you or your family ordinarily inhabited it, and that there is no minimum time requirement. Two limits apply:
- After 1981, a family unit can designate only one principal residence per year, so years claimed on Nosara cannot also be claimed on your Canadian home.
- A property used mainly to earn income generally does not qualify.
For a home that has been your family's winter base and rarely rented, this designation can shelter some or all of the Canadian gain. For a full-time rental, it usually will not help.
💡 Key insight: Your rental pattern decides two things at once: whether you file a T1135 and whether the principal residence exemption is available later. Personal use helps on both.
Moving to Nosara Full Time: The Departure Tax
Some owners eventually leave Canada and make Nosara home. The CRA's page on dispositions of property for emigrants says that when you become a non-resident, most property is treated as sold at fair market value. Its list of exceptions includes Canadian real property, RRSPs, TFSAs and pensions. Foreign real property is not on that exception list, so a Nosara home you own on the day you leave is generally deemed sold for Canadian tax purposes, and the CRA's Form T1161 asks you to list properties inside and outside Canada.
Canadian law firms such as Wright Business Law describe an option to defer paying the departure tax by filing Form T1244 and posting acceptable security. The principal residence exemption may also be relevant for the emigration year if the Nosara home qualifies.
If emigration is on your horizon, our snowbird ownership guide and the retirement in Nosara guide cover the residency and health insurance side.
💡 Key insight: Leaving Canada triggers a tax event on your Nosara home even if you never sell it. Plan the timing of your departure with your accountant a year ahead.
How the Rules Change With How You Use the Home
| How you use the Nosara home | T1135 required? | Costa Rica rental tax? | Canadian T776? | Principal residence possible? |
|---|---|---|---|---|
| Family use only, never rented | No, personal-use exclusion (CRA) | No | No | Yes, if ordinarily inhabited |
| Rented only to cover costs, mostly personal | Generally no (CRA example) | Yes, on rent received | Yes | Likely, if mainly personal |
| Rented more than half the year for profit | Yes, if cost over $100,000 | Yes | Yes | Generally no |
| Main house plus rented casita | Depends on the CRA's unit test | Yes, on casita rent | Yes | Possibly, on the personal portion |
A Simple Annual Checklist for Canadian Owners
- Log personal days and rental nights every year. This supports both the T1135 position and any future principal residence claim.
- Keep Costa Rica tax receipts for income tax, property tax and any IVA filings. You need them for the T2209.
- Convert every transaction to Canadian dollars using Bank of Canada rates, and keep the conversion file.
- Track your adjusted cost base, including improvements, in Canadian dollars from the purchase date.
- Calendar the T1135 deadline of April 30 (or June 15 if self-employed) the first year the home becomes specified foreign property.
- Review the structure (personal title, SA or SRL) with both accountants before any change in use.
Questions to Ask Before You Buy
Before you make an offer on a Nosara property, take these to a Canadian accountant:
- Based on how I plan to use it, will this home be specified foreign property?
- If I rent it, will Costa Rica's gross-based tax exceed my Canadian tax on the net?
- Should I hold it personally or through a corporation, from a Canadian point of view?
- What records do I need to start keeping on day one to protect a future principal residence claim?
- If I might emigrate in the next ten years, how does that change the plan?
Getting these answers first changes which property makes sense. A home you will mostly use yourself in a quiet part of Garza and a full-time rental near the beach in Playa Guiones are taxed very differently on the Canadian side, even at the same price. If you would like help matching a property to your plan, our buyer's guide is the best place to start.
💡 Key insight: Decide how you will use the home before you choose the home. For Canadians, use pattern drives the tax result more than price does.
Sources referenced: Canada Revenue Agency (Form T1135 Q&A, Foreign Income Verification Statement page, table of penalties, line 40500 federal foreign tax credit, dispositions of property for emigrants), Department of Finance Canada (Tax Information Exchange Agreement notices), Prime Minister's Office (March 21, 2025 release), PwC Worldwide Tax Summaries for Costa Rica, Ley 7509 Article 23, El Observador, Airbnb Newsroom, CPA Canada, MoneySense, Taxtron and Wright Business Law. Rules change; verify current figures with a licensed tax professional before filing.