If another country taxed income that you also reported on your Canadian return, the federal foreign tax credit is what keeps that income from being taxed twice over. It goes on line 40500.
Who can claim it
Generally, you can claim the credit if two things are true. You were a resident of Canada at any time in the year. And you included income from sources outside Canada on your Canadian return that you paid non-business or business taxes on to a foreign country. A tax treaty with the other country may affect whether you are eligible.
Some income is left out. If you deducted an amount on line 25600 for income that is not taxable in Canada under a tax treaty, keep that income out of the foreign tax credit calculation. Keep any tax withheld from it out too.
Where the amounts are worked out
Form T2209, Federal Foreign Tax Credits, calculates the federal amount. The result goes on line 40500 of your return.
There is a provincial or territorial side as well. If you lived outside Quebec at the end of the year, Form T2036, Provincial or Territorial Foreign Tax Credit, calculates that amount. It goes on the applicable line of your Form 428. Quebec residents do not complete Form T2036. Revenu Québec sets out the Quebec credit.
Foreign income and foreign taxes have to be converted to Canadian dollars. Use the Bank of Canada exchange rate in effect on the day the amounts arose. For a monthly pension, or several payments made at different times in the year, use the average annual rate.
What supports the claim
Official receipts showing the foreign taxes you paid. These come from a foreign government or tax authority rather than from a merchant. The CRA's page does not list any further fields they must carry.
If you paid taxes to the United States, the CRA also wants your W-2 information slip, your U.S. 1040 return, your U.S. tax account transcript, and any other supporting documents that apply.
If your documents are not in English or French
The CRA needs a copy of the original document in the foreign language plus an acceptable translation. To be acceptable, the translation must show the signatory's name printed in the Latin alphabet and meet one of these conditions:
- it is certified by someone with the authority to administer an oath or solemn declaration — a commissioner of oaths, a notary public, or a lawyer — unless the translator is a member in good standing of a provincial or territorial organization of translators and interpreters of Canada
- it carries the seal and signature of an official from the foreign country's embassy, high commission, or consulate confirming it is a true translation
- it carries the signature of a Chartered Professional Accountant confirming it is a true translation
- it includes a written statement of the profession and the signature of a teacher, professor, or religious leader confirming it is a true translation
Your own name cannot be the same as the signatory's name.
What to keep
Keep the official receipts for the foreign taxes you paid, any foreign return or transcript, and the translations. Dossier files a foreign tax document with its translation attached, so the pair stays together.
If you file electronically, keep the supporting documents in case the CRA asks to see them later. If you file on paper, attach the completed Form T2209, the official receipts showing the foreign taxes you paid, and a note explaining your calculations.
Official CRA sources
Source: Canada Revenue Agency (canada.ca). Not tax advice.