Canada Taxes?

Question

Does a Canada resident have to pay tax on his income earned outside Canada,even if its tax exempt in the country
where it has been earned.

T E · Accepted Answer

Yes, a cdn resident is taxable on his/her income earned inside and outside Canada.  Unless the tax treaty with that foreign country specifically provides a tax relief, the tax exempt income in the foreign country may also be taxable in Canada based on the Cdn Income Tax Act.

The Arbiter of common sense · Answer

Yes.  The fun part of the foreign earnings situation is this:

You are taxed on the foreign income based on Canadian tax policy.  Then, you get a foreign tax credit for any tax already paid to the foreign country.  What's that you say, you paid none because it was exempt?  So sorry, no credit then.

See what happens? The net effect of the system is that you pay the HIGHER of the two tax rates (foreign and Canadian).  They get you coming and going...

Canada Taxes?

2 Answers