Do I need to pay tax on income earned outside Canada?

Resident Canadians need to report income earned from all sources including foreign sources, this include employment income from another country, income from investment property (including stocks), income from business and dividends.

You may have already paid income tax in the country where you earned this income, and to keep you from paying taxes twice, CRA has in place a foreign income tax credit to decrease the income tax amount you have to pay on your Canadian income tax return, so long as Canada has a tax treaty in place with that country.

Tax Treaties

Canada has tax treaties with many countries around the world, the main purpose of tax treaties is to avoid double taxation and prevent tax evasion. Tax treaties:

• Define which taxes are covered and who is a resident and eligible to the benefits
• Often reduce the amounts of tax to be withheld from interest, dividends, and royalties paid by a resident of one country to residents of the other country
• Limit tax of one country on business income of a resident of the other country to that income from a permanent establishment in the first country
• Define circumstances in which income of individuals resident in one country will be taxed in the other country, including salary, self-employment, pension, and other income
• May provide for exemption of certain types of organizations or individuals
• Provide procedural frameworks for enforcement and dispute resolution

Foreign Tax Credit

Both Federal and Provincial foreign tax credits are available, and you may be able to claim this credit if you paid foreign taxes on income you received from outside Canada and reported on your Canadian income tax return.

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