Foreign taxes on investment income

As a resident of Canada, you’re subject to Canadian income taxes on your worldwide income, even if it was earned in another country. If the amount of foreign income received is net of foreign taxes withheld, you must gross-up the amount received by the amount of income taxes withheld. For example, if you receive a $170 foreign dividend payment ($200 in foreign dividends minus $30 in withholding tax) you must include the full $200 in your income. The foreign income is to be converted into Canadian dollars by using the average rate of exchange for 2015 or the actual exchange rate in effect when you received the income. The withholding tax can be claimed as a foreign tax credit with certain restrictions.

The foreign tax credit is calculated on a per-country basis, and separate calculations are required for business and non-business income tax.