A foreign tax credit is available to any taxpayer who has been a resident of Canada and earned worldwide income at any time during the tax year. The income can be from employment earnings, business or rental income, investment income, or a pension from another country. The case study that follows highlights a typical issue that many Expats in Toronto come across.
Residents of Canada are subject to income tax everywhere over the world. If you receive income from a foreign source, you must pay taxes on both your Canadian and overseas earnings. Since you must pay taxes in both Canada and the foreign country, this doubles your tax liabilities (if applicable). The Foreign Tax Credit offered by the Canada Revenue Agency (CRA) relieves Canadians who are subject to double taxation. This makes it simpler and lowers the amount of tax that a Canadian resident must pay. Once someone is eligible for the Foreign Tax Credit, the taxes they have already paid abroad can be deducted from their Canadian tax obligations... [learn more]