Updated Checked by the Tax-Services.ca editorial team How we check
International tax for a person living in Canada starts with one rule: if you’re a Canadian resident for tax purposes, you report your income from everywhere, including sources outside Canada. A foreign pension, a rental flat abroad or interest from an overseas account all go on your Canadian return. Foreign tax you already paid on that income can usually earn you a credit, so you’re not taxed twice at full rate.
Are you a resident for tax purposes?
Your citizenship and immigration status don’t decide tax residency. The CRA looks at your ties. Significant residential ties almost always mean a home in Canada, plus a spouse or common-law partner and dependants who stayed here. If you keep those, the CRA can treat you as a factual resident even while you live or travel abroad.
Secondary ties count too, though only when the CRA looks at them together. Think of a Canadian driver’s licence, bank accounts, credit cards, provincial health coverage and social connections here. One of them alone rarely settles the question. Several of them, next to a home and a family, usually do.
Picture Ivan, an engineer from Edmonton who takes a two-year contract in Dubai. His wife and kids stay in the Edmonton house, and he keeps his Alberta health card, his bank accounts and his licence. Whatever his job title says, he’s still very likely a Canadian resident for tax, and his Dubai pay belongs on his Canadian return. If the family went with him and the house was sold, the answer could flip.
The CRA sets out the tests in Income Tax Folio S5-F1-C1. If you’re leaving or arriving, read that page before you file rather than after.
What does foreign income do to your tax bill?
It’s taxed like any other income you have, at your marginal rate. Take an Ontario employee earning $75,000 in 2026. The income tax calculator shows $12,704.65 of federal and Ontario tax. Add $10,000 of other taxable income and the total goes to $15,669.65. That’s $2,965 more, or 29.65 cents on each extra dollar, before any foreign tax credit.
The marginal tax rate calculator gives you that next-dollar rate directly. And if the income is dividends or gains, the dividend tax calculator and capital gains tax calculator apply the right treatment. We haven’t tested them on foreign dividends, so check how the foreign source is entered.
How does the foreign tax credit work?
You claim it on form T2209 if you were a resident at any time in the year and paid tax to another country on income you’re also reporting in Canada. It can’t exceed the Canadian tax on that same income, so your credit may be smaller than the foreign tax you paid. If foreign taxes across all countries total more than $200, the CRA wants a separate calculation for each country.
Some foreign tax doesn’t qualify. That includes tax linked to a capital gain where you claimed the capital gains deduction, and tax charged only because you hold citizenship there on income from a Canadian source. Keep the foreign tax slip or assessment with your records.
The CRA’s page on the federal foreign tax credit adds a practical point: foreign income and foreign taxes both have to be converted to Canadian dollars, using the Bank of Canada rate from the day the amounts arose. Don’t use your bank’s rate or one rate for the whole year unless the CRA says that’s allowed for your case.
Do you have to report foreign property?
Yes, once the cost passes a line. Form T1135 is for Canadian residents who owned specified foreign property costing more than $100,000 at any time in the year. The CRA lets you use simpler reporting if the total cost stayed under $250,000 and asks for more detail at $250,000 or above.
| Item | Rule |
|---|---|
| Threshold to file T1135 | Total cost over $100,000 at any time in the year |
| Simplified reporting | Cost over $100,000 but under $250,000 |
| Detailed reporting | Cost of $250,000 or more |
| Due date, most individuals | April 30 (June 15 if self-employed) |
| Due date, corporations | Six months after year end |
| Not reported | Personal-use property, and property used only in an active business |
The $100,000 is measured on cost, so market value doesn’t matter, and it adds up across accounts. A brokerage account in another country, a bank balance abroad and a foreign rental can push you over between them. Penalties for late or false filing are real, though we haven’t listed amounts because they’re set out on the CRA page and can change.
What if you’re moving to or from Canada?
A move is where most international tax trouble starts, because the year of the move can be split in two. Before you go, or soon after you land, write down the exact dates you left your home, arrived in the new country and cut or kept each tie: house, health coverage, bank accounts, licence. Those dates are what the CRA will ask about.
Keep the paperwork from both countries, such as pay slips and the foreign tax return, in one folder. Newcomers should also see our guide for people new to Canada, which covers the first return in more detail.
Common mistakes with international tax
The first is thinking foreign income doesn’t count because no slip arrived. Canadian residents report it anyway.
The second is claiming the foreign tax credit without proof. The third is treating a move as automatic: leaving Canada doesn’t end residency by itself if the home, spouse and dependants are still here.
Also check whether a tax treaty applies. We haven’t covered treaty rules here, since they vary by country. For anything beyond a simple case, like a cross-border move or a foreign business, an accountant who does international returns is worth paying for. That’s one place where a few hundred bucks of advice can save thousands.
How we checked the figures
Residency, T1135 and foreign tax credit rules come from Canada Revenue Agency pages on determining residency status, the foreign income verification statement and form T2209. Tax examples come from our calculators, which use 2026 federal and Ontario figures.
Frequently asked questions
Do Canadian residents pay tax on foreign income?
Yes. Residents report income from sources inside and outside Canada on their Canadian return.
How do I avoid paying tax twice on the same income?
Claim the federal foreign tax credit on form T2209 for foreign tax you paid. It cannot exceed the Canadian tax on that income.
When do I need to file a T1135?
When you own specified foreign property costing more than $100,000 at any time in the year. It is due with your return.
Does leaving Canada end my tax residency?
Not automatically. If you keep significant ties, such as a home, a spouse or dependants here, the CRA can still treat you as a resident.
Is foreign property in my home country always reported?
No. Personal-use property and property used only in an active business are not counted toward the T1135 threshold.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill