Foreign Tax Credit: Who Qualifies and What You Get
Learn how to claim credits for taxes paid to foreign governments on your international investments to avoid being taxed twice.
The Foreign Tax Credit is a way to reduce the amount of tax you owe in Canada if you have already paid taxes on the same income to a foreign government.
Who it's for
This is for investors who hold foreign stocks that pay dividends.
What you get
You receive a credit that accounts for the withholding taxes already paid to foreign governments. This helps prevent you from being taxed twice on the same money.
What it costs you
There is no direct fee to use this, but it does require you to do some extra administrative work. You will need to carefully track your foreign income using the tax slips provided to you, such as T3 or T5 slips.
The catch to know
You cannot claim this credit for foreign stocks that are held inside an RRSP.
How to apply
- Collect your tax slips that show foreign income and taxes paid.
- Track your foreign income throughout the year.
- Report the foreign income and the taxes paid on your tax return.