Foreign interest and dividends

When entering foreign income, why is it necessary to specify whether it consists of interests or dividends?

Foreign investment income must be identified as either interest or dividends to allow the foreign tax credit to be determined properly with regard to US taxes paid, for instance.

This is in compliance with the Canada-US tax agreement whereby the withholding rate on US interest income is reduced from 15% to 10%.

Note however that the tax paid in excess of the withholding rate is not eligible for a foreign tax credit as it is not considered a tax obligation.

Whether you are entering foreign income with the Foreign-Inc keyword or within the T-Slip group, you will be able to enter interest and dividends separately.

For US income, the foreign tax paid eligible for the foreign tax credit will be limited to 10% of the net US interest income, and to 15% of the net US dividend and pension income.