FORM 2209

Form T2209: Reporting Foreign Income

If you are a Canadian resident and make foreign income, you are subject to tax duty to the CRA. Wait, but I’ve already been taxed by the country where the income is made! How is it fair?…as some of you would ask. Relax, reporting your foreign income to the CRA doesn’t mean double taxation. Rather, it is to inform the Canadian government of your sources of income to avoid causing unnecessary confusion or suspicion, not to mention the benefits of claiming the federal foreign tax credits that will help reduce some of your other tax obligations. 

So, What is Federal Foreign Tax Credit?

If you pay business or non-business taxes on an income made in a foreign country, you can claim the Federal Foreign Tax Credit once you have reported the income. If such taxes are paid to multiple countries, each tallying more than $200, you need to calculate the tax to each source of income separately before reporting them together on the T2209 form. 

Does contribution to foreign public pension plans qualify for Federal Foreign Tax Credit?

Yes, and they are considered non-business income tax as per the CRA given the concern that you will never benefit from that sum of money made while you work temporarily under foreign legislation. This rule of thumb applies to the Federal Insurance Contributions Act (FICA), which dictates that under U.S. law, all employees are subject to payroll tax regardless of residency status. If you contribute to the FICA, you’re eligible for Federal Foreign Tax Credit. 

 Is it the same with all other countries?

Unfortunately, no. The credit varies between countries that have signed tax treaties with Canada and those that haven’t. Please consult us for details if you aren’t sure. 

Is there a provincial foreign tax credit?

By the same token that you pay both federal and provincial income taxes, the foreign tax credit is also applicable province-wide, on the caveats that first, your federal foreign tax credit on non-business income is less than the tax you have paid to a foreign country, and two, you do not reside in Quebec. You can claim Provincial foreign tax credit by filling out the T2036 form. 

Last but not least, given that you are reporting your taxes to the CRA, be sure to apply the conversion rate at the time of the transaction, not the day you file your taxes when you calculate them in Canadian dollars.

Find Out More

This article includes a general summary of tax rules. Need specific tax advice? Hire a Professional Accountant and get the best working for you. 

Filing Taxes concisely deals with several complex issues; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. 

Our experienced and professional team at Filing Taxes is here to set you on the right path considering your personal business situation. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.

Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.

Written By:
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

Leave a Reply

Your email address will not be published. Required fields are marked *

February 29, 2024
Difference Between Factual and Deemed Tax Residency in Canada & Tax Implications

Navigating the complex world of taxation in Canada can be challenging, especially when dealing with residency status and its implications on your tax obligations. If you’re a resident, you have to declare your worldwide income and pay taxes on it. If you’re a non-resident, you’re taxed only on your Canadian-sourced income. Therefore, it is essential […]

Read More
February 29, 2024
Why hire a Cross- Border Tax Accountant in Toronto?

Cross-border tax refers to the taxation considerations and implications that arise when individuals, businesses, or investments operate across national borders. Cross-border tax planning is a specialized form of tax mitigation that helps individuals and businesses to minimize their exposure to double taxation. It involves navigating the complex web of tax laws and regulations across borders […]

Read More
April 6, 2022
U.S. Tax I.D. Numbers for Canadians

Are you interested in obtaining an Individual Taxpayer Identification Number? Read on to find out what an ITIN (Individual Taxpayer Identification Number) is and how you can apply for one. Please note, that this number is not a replacement for the Social Security Number (SSN). This information will teach you how to apply for an IRS […]

Read More
Contact Form Demo

This will close in 0 seconds

phone-handsetchevron-down Call Now linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram