Line 632 - Federal foreign non-business income tax credit
Line 632 - Federal foreign non-business income tax credit
Use Schedule 21, Federal and Provincial or Territorial Foreign Income Tax Credits and Federal Logging Tax Credit, to calculate this credit.
A federal foreign non-business income tax credit is available to Canadian residents to prevent double taxation of any non-business income earned in a foreign country that was taxed by that foreign country. The credit is also available to authorized foreign banks on their Canadian banking business from sources in a foreign country. This credit reduces Part I tax that the corporation would otherwise have to pay.
Foreign non-business income includes dividends, interest, and capital gains. It does not include dividends received from foreign affiliates, or income from operating a business in a foreign country.
Foreign non-business income tax does not include any foreign tax paid on income that is exempt from tax in Canada under an income tax treaty.
As another option, under subsection 20(12), instead of claiming a foreign non-business income tax credit, a corporation can deduct from income all or any part of non-business income tax it paid to a foreign country.
If, after you claim the federal foreign non-business income tax credit, there is any foreign non-business income tax left over, you can claim it as a provincial or territorial foreign tax credit. See page 101 for details.
Under section 110.5 and subparagraph 115(1)(a)(vii), you can also increase your taxable income so that you can use an otherwise non-deductible foreign non-business income tax credit. See "Line 355 - Section 110.5 additions or subparagraph 115(1)(a)(vii) additions" on page 74 for details.
To claim this credit, complete Part 1 of Schedule 21. Calculate the federal foreign non-business income tax credit for each country separately. Use more than one schedule if more space is required.
Add all the allowable foreign non-business income tax credits in column I on Schedule 21. Then, enter the total allowable credit or a lesser amount on line 632.
References
Subsection 126(1)
S5-F2-C1, Foreign Tax Credit
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