Do I have to declare foreign income in Canada?

Do I have to declare foreign income in Canada?

April 24, 2020

Image of foreign income to declare on taxesIncome from outside Canada can make filing your taxes more complicated. The rules are different depending on if you are resident in Canada or if you are non-resident. If you’re a resident, you must declare any income earned outside of Canada on your Canadian tax return.

Non-Residents declare foreign income in Canada

Non-residents declare net income earned outside of Canada so you can use the non-refundable tax credits in Canada. Your non-Canadian income isn’t taxed in Canada, but it affects your non-refundable tax credits.

NOTE: You might have to report your Canadian income to the tax department in the country where you live. And use the Canadian tax payable as a credit for your tax return there. It is usually best to first file your Canadian tax return to determine your net Canadian income and taxes payable. Then file your resident country’s tax return.

See also ‘Filing Tax as a Non-Resident

Tax Credit for Canadian Residents

Canadians pay taxes worldwide income. Your income from a job in another country, a business or from an investment property. Usually, you pay taxes where you earn your income, too.

So you don’t pay taxes twice, Canada uses a foreign income tax credit to decrease the tax payable in Canada, providing a tax treaty is in place with that country.

A federal foreign tax credit is for Canadian taxpayers who are resident in Canada during the tax year. Then, you disclose where you earned the income, even if it is from more than one country.

Submit a separate foreign tax credit form for each country. Business income and non-business income are submitted on separate forms, too.

The foreign income tax claim equals the lesser of:

  • your foreign income tax paid or
  • the Canadian income tax you would pay on that income.

If there is a tax treaty with that foreign country, you aren’t eligible for the tax credit. So, check Form T2209, Federal Foreign Tax Credits for more information.

Nimalan Balachandran is the Founder & CEO of CloudTax, an income tax filing platform, certified by the Canada Revenue Agency, that allows simple tax filers to file their taxes from home. He was a former employee at the Canada Revenue Agency, and has been in the tax preparation industry for over 10 years. His goal was to bring his passion for technology and assisting Canadians in minimizing their taxes together, by building new software that allows Canadian residents to file simple taxes on their own. Along with his background in accounting, finance, artificial intelligence & business strategy from Seneca College and Massachusetts Institute of Technology, Nimalan has also worked as a Financial Advisor at Sun Life Financials. Nimalan also co-founded a not-for-profit organization, ATI Foundation, serving individuals with intellectual and physical disabilities in the Greater Toronto Area.


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