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International taxation, for most Canadians, comes down to three questions. Are you a Canadian resident for tax? If so, you report income from everywhere. Did you pay tax abroad? Then a foreign tax credit stops the same income being taxed twice. And do you own foreign property that cost more than $100,000? If yes, you file Form T1135 on top of your return.
Does international taxation apply to you?
Residency, not citizenship, decides it. The CRA looks first at three ties it says will almost always be significant: a home available to you in Canada, a spouse or common-law partner living here, and dependants here. Any one of them can make you a factual resident.
Without those, the CRA weighs secondary ties together. Think Canadian bank accounts, a driver’s licence, provincial health coverage, or personal belongings left behind. There’s also a day count. Spend 183 days or more in Canada in a calendar year, and you’re a deemed resident for the entire year.
The stakes are simple. Residents pay Canadian tax on worldwide income. Non-residents generally pay only on Canadian-source income. If you moved abroad but kept a house here, a spouse here, or kids in a Canadian school, don’t assume you left, because the CRA may still see you as a resident and expect a return that lists every dollar you earned anywhere. Read the CRA folio on residence status first.
How does the foreign tax credit work?
Say a Canadian resident in Ontario earns $60,000 at work and also gets $10,000 of foreign income that was taxed abroad at $1,500. We ran both cases through the income tax calculator. On $60,000 alone, federal and Ontario tax is $8,320.50. Add the $10,000 as ordinary income and it becomes $11,285.50, so the extra income costs $2,965.
The credit you can claim is the smaller of two amounts, the foreign tax you paid or the Canadian tax on that income. Here that’s the $1,500 paid abroad. Your Canadian bill on the foreign income drops to about $1,465. A simplified picture, because the real formula weighs income country by country and needs the T2209 form.
Mind the currency too. Say you were paid US$1,000 and the Bank of Canada rate that day was 1.37 (an illustration, not a real quote). You report $1,370, and the foreign tax you paid gets converted the same way. Keep a small note of the rate and the date for each amount, because you’ll want it if the CRA asks.
Two rules trip people up. Convert foreign amounts to Canadian dollars using the Bank of Canada rate on the day they arose. And if a treaty says some of your income isn’t taxable in Canada, keep it out of the credit. Anything you paid abroad above what a treaty required doesn’t count as foreign tax paid.
Do you have to file Form T1135?
Only when specified foreign property costing more than $100,000 was held at any time in the year. That includes funds held outside Canada, shares of non-resident corporations, foreign bonds and property outside Canada that isn’t for personal use. Property used only in an active business and personal-use property are excluded.
| Who files | Due date |
|---|---|
| Individual employee | April 30 |
| Self-employed individual | June 15 |
| Corporation | Six months after year end |
Those are the dates the CRA page lists. It doesn’t say which tax year they apply to, so check the current form before you rely on them.
Penalties for a late or wrong form are significant, the CRA says, and the CRA adds three years to its reassessment period when the form is missing or wrong. We haven’t confirmed the dollar amounts on the CRA page itself, so we don’t quote them.
Do you still report it if you already paid tax abroad?
Yes. Paying tax in another country doesn’t remove the duty to report the income here. The credit is how Canada avoids double taxation, and you only get it by reporting the income in the first place. Picture Lena in Ottawa, who rents out a flat in Lisbon and pays Portuguese tax on the rent. Both the rent and the tax paid go on her Canadian return, and the credit works out the rest.
Whether a particular holding counts toward the T1135 line is its own question. Read the CRA’s list of specified foreign property for your case instead of guessing from a friend’s experience.
Which other income needs a look?
Foreign dividends, interest and rental income all go on your Canadian return. Rental profit from a property abroad uses the same idea as at home. The rental income tax calculator shows the Canadian side of that. Selling foreign shares is a capital gain, and the capital gains tax calculator uses the 2026 inclusion rate of 50%. That rate is our working figure. The CRA hasn’t published it on a page we could confirm, and the proposed rise to two thirds was cancelled on March 21, 2025.
Buying in Canada from abroad is a different topic. See the non-resident buyer tax calculator for that.
Mistakes and limits
Forgetting the form is the big one, and it’s an easy slip when your accounts sit abroad out of sight, since the tax on the income might be right and the return still incomplete. Then there’s guessing at exchange rates, or claiming a credit for tax that a treaty said you shouldn’t have paid. A fourth one is thinking that tax paid abroad wipes out Canadian tax. It only offsets it up to the Canadian amount.
Our tools have limits too. They don’t model the country by country credit formula, treaty rates or Quebec’s own foreign tax rules. For Quebec residents the CRA points you to Revenu Québec.
The sources behind this page
Residency rules come from the CRA income tax folio on residence status. The T1135 threshold, exclusions and due dates come from the CRA’s foreign income verification statement page. Credit rules come from the CRA page for the federal foreign tax credit, line 40500. The worked example uses our 2026 Ontario tax engine. We aren’t a government service and we don’t speak for one.
Frequently asked questions
Do Canadian residents pay tax on foreign income?
Yes. Residents pay Canadian tax on worldwide income. Non-residents generally pay only on Canadian-source income.
What is the 183 day rule?
A person without significant residential ties who spends 183 days or more in Canada in a calendar year is a deemed resident for the entire year.
How does the foreign tax credit work?
You can claim the smaller of the foreign tax paid and the Canadian tax on that income, using Form T2209.
When do I need to file Form T1135?
When specified foreign property cost more than $100,000 at any time in the year.
What exchange rate do I use?
The CRA says to use the Bank of Canada rate in effect on the day the amount arose.
- 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