Tips relating to foreign income
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Hide expandable textCanadians are required to report their world income. Thanks to tax treaties with other countries, Canada has access to information from abroad that can be used to assess your tax liability. It is always best to report all foreign income, and any taxes paid on it.
Foreign taxes that you have paid may be used as a credit against your Canadian taxes. Let the program calculate the best possible result for you. Enter your foreign income, country of origin, and tax paid, and the program will calculate the foreign tax credits.
Your foreign pension may qualify for a tax deduction under the terms of a treaty signed between Canada and the originating country. If you do not know whether any part of your foreign pension is free of tax, contact the CRA. The program easily handles United States social security benefits and United States individual retirement accounts (IRA).
You are required to report certain foreign property you own with a total cost greater than $100,000. Form T1135 (Foreign income verification statement) is used to report this income, and information from the form is used to evaluate foreign income reported by you on your tax return. Complete the T1135 carefully as the penalties for incomplete disclosure can be severe. This form must be filed every year.
If you paid foreign taxes on foreign income you received, do not reduce the amount you report by the amount of tax that the foreign country withheld. However, you may be able to claim a foreign tax credit when you calculate your federal and provincial or territorial taxes.
Your federal foreign tax credit on non business income may be less than the tax you paid to a foreign country. If this is the case and you were not a resident of Quebec, you may be able to claim a provincial or territorial foreign tax credit. The program will calculate the credit on form T2036 (Provincial foreign tax credit). If you were a resident of Quebec, form TP-772 (Calculation of foreign tax credits) will be produced.
You may be able to deduct the amount of net foreign taxes you paid and for which you have not received a federal, provincial, or territorial foreign tax credit. Certain taxes are excluded. The program will calculate these amounts based on the information entered.