Inheriting Assets Abroad: Is There Tax in Canada?

Canada has no inheritance tax, but income and sales after you inherit have to be reported; the documents to keep

Scott Tang, CPAUpdated 2026-11-052026 rules5 min read

Your parents in China pass away and leave a home, savings and shares. As a Canadian tax resident, you pay no Canadian tax on the inheritance itself (Canada has no estate tax or inheritance tax). But once you inherit them, the assets are yours: the income they earn afterwards, the gain when you eventually sell, and foreign property reporting all follow Canadian rules.

Canada doesn't tax heirs on what they inherit

Value at inheritance

The Canadian cost of inherited assets is generally their market value when you acquired them

T1135

Inherited foreign property has to be reported if its total cost is more than $100,000

T1142

Generally not needed for distributions during estate administration; may be needed for distributions from, or amounts owed to, a foreign testamentary trust that continues afterwards

The rules depend on where the person who died was resident

Item	The person who died was not a Canadian resident (e.g. parents in China)Recommended	The person who died was a Canadian resident
Who pays tax at death	Canada generally doesn't tax it; local rules apply	Most capital property is usually deemed sold at market value (rollovers to a spouse, exemptions and registered plans have their own rules), and the tax is paid on the final return
When you receive it	The inherited capital is generally not taxable; income earned during estate administration needs to be identified separately	The inherited capital is generally not taxable (tax on the deemed sale is paid on the estate's side); the estate's income needs to be identified separately
Your cost	Market value at the time you inherit	Generally the market value at which the estate was deemed to have sold

What to report after you inherit

Inherited asset	Each year afterwards How to report income	Selling later How it's calculated	T1135 Does it count?
Home in China (rented out)	✓Report the rent on Form T776	✓Sale price − market value at inheritance; half included in income	✓Yes
Home in China (lived in by family)	—	◐Depends on whether the principal residence exemption can be used	✕No; personal-use property doesn't count
Savings in China	✓Report interest every year	◐Converting currency may produce a foreign exchange gain or loss	✓Yes
Shares and funds in China	✓Report dividends every year	✓Gain calculated from the market value at inheritance	✓Yes
Share of an estate not yet distributed	—	◐Capital and estate income are looked at separately	◐First confirm the legal nature of the interest in the estate or trust, whether it was acquired for consideration and whether you have directly acquired the assets, then decide on the T1135; you can't reach a blanket conclusion just because it hasn't been distributed yet

Home in China (rented out)

💰 Each year afterwards: ✓Report the rent on Form T776
🔁 Selling later: ✓Sale price − market value at inheritance; half included in income
📋 T1135: ✓Yes

Home in China (lived in by family)

💰 Each year afterwards: —
🔁 Selling later: ◐Depends on whether the principal residence exemption can be used
📋 T1135: ✕No; personal-use property doesn't count

Savings in China

💰 Each year afterwards: ✓Report interest every year
🔁 Selling later: ◐Converting currency may produce a foreign exchange gain or loss
📋 T1135: ✓Yes

Shares and funds in China

💰 Each year afterwards: ✓Report dividends every year
🔁 Selling later: ✓Gain calculated from the market value at inheritance
📋 T1135: ✓Yes

Share of an estate not yet distributed

💰 Each year afterwards: —
🔁 Selling later: ◐Capital and estate income are looked at separately
📋 T1135: ◐First confirm the legal nature of the interest in the estate or trust, whether it was acquired for consideration and whether you have directly acquired the assets, then decide on the T1135; you can't reach a blanket conclusion just because it hasn't been distributed yet

Documents to keep

1
Death certificate
The date of death
2
Inheritance notarization
Notarial certificate of inheritance or court documents, and the will
3
List of assets
The value of each asset at the time of inheritance
4
Valuations
Property appraisals; share values on the day
5
Title and fund transfers
Records of the transfer of title, and remittance receipts

The market value when you acquire the inheritance is generally your cost (the timing depends on when you actually acquire it legally and how the distribution is arranged). Without proof of the value, when you sell later the CRA may use a lower cost, and you would pay more tax.

Points to watch

Tax and procedures in China
China has no inheritance tax, but transferring title, and selling a home later, may involve taxes and fees; these follow local rules and are handled by a local adviser.
Bringing the money over
Transferring inherited money to Canada is not itself taxable, but the bank will ask where it came from, so have the inheritance notarization and records of the asset sales complete — see "Large Transfers Into and Out of Canada: Why Banks Ask and What to Prepare" in this series.
If there are US assets
If the person who died owned US shares or property, the US may charge estate tax — see "Canadian Residents with US Shares or Property: The US Taxes to Watch" in this series.
After the estate is administered
If a foreign testamentary trust continues after the estate administration ends and makes distributions to you, or you owe it money, you may need to file Form T1142. While the estate hasn't been distributed and someone in China is managing it for you, whose income it is and when to report it depend on the actual circumstances.

How Sheng Qian CPA can help

Set the cost
We build a Canadian-dollar cost table for each asset, using the market value and exchange rate at the time of inheritance.
Reporting after you inherit
Rent, interest, dividends, the T1135 and any T1142, handled together.
Calculate before you sell
If you plan to sell an inherited home or shares, we first work out the Canadian tax and the timing. For fees, see "What Sheng Qian CPA Can Do for Cross-Border Families: From Tax Returns to Foreign Asset Reporting" in this series.

Sources

CRA: Capital gains (T4037) · What to do when someone has died – legal representative
CRA: About Form T1142
CRA: Foreign Income Verification Statement (T1135) · Form T1142

Disclaimer

This article is general information only and is not tax advice. Everyone's situation is different; please consult a CPA about your specific arrangements, and a qualified local lawyer or adviser about inheritance and tax matters in China. Service fees are as set out in our written quote.