Canada Revenue Agency (CRA) Provincial and Territorial Foreign Tax Credits

Description:

The provincial or territorial foreign tax credit is available to corporations and can be claimed for taxes it paid to another country on foreign non-business income. This credit reduces the provincial tax otherwise payable.

Eligibility:

The applicant must:

  • be a corporation,
  • be resident in Canada throughout the tax year,
  • have a permanent establishment in the province or territory at any time in the tax year,
  • have a foreign investment income for the tax year,
  • have the foreign non-business income tax paid exceeding the federal foreign non-business income tax credit deductible for the year.

This tax cannot be claimed for the provinces of Quebec and Alberta on the federal return, because these provinces collect their own income taxes.

Documentation Needed:

To claim the foreign tax credit, applicants must complete Schedule 21, Federal and Provincial or Territorial Foreign Income Tax Credits and Federal Logging Tax Credit. On the appropriate lines of part 2 of Schedule 5, Tax Calculation Supplementary – Corporations, they must enter the applicable provincial and territorial foreign tax credits.

Other Things to Note:

For Ontario, an authorized foreign bank is eligible for the foreign tax credit if it performed Canadian banking business.

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