Foreign Income Tax Calculator

How Foreign Income Is Taxed in Canada

Canadian residents are taxed on their worldwide income, wherever it is earned. If you work abroad, hold investments in other countries or receive foreign-source income, you must report it on your Canadian return, converted to Canadian dollars. To prevent double taxation, the CRA grants a foreign tax credit that reduces your Canadian tax by the tax you already paid to the other country, up to the Canadian tax attributable to that foreign income.

Canada has tax treaties with more than 90 countries. They decide which country may tax each type of income and often cut withholding tax on dividends, interest and royalties — US dividends, for example, are usually withheld at 15% once you file a W-8BEN. Employment income earned in the United States is especially common because of cross-border work. The federal credit is calculated on Form T2209 and the provincial or territorial credit on Form T2036.

Worked Example: $30,000 of Foreign Income With $6,000 of Foreign Tax

If the other country had taken $8,000, only $6,064.64 would be creditable and the remaining $1,935.36 would not reduce your Canadian tax. This calculator applies that limit to your combined federal and provincial tax. The real forms split it into a federal and a provincial credit and treat business and non-business income separately. For investment income (dividends, interest), foreign tax above 15% of that income is not creditable at all; it can only be claimed as a deduction.