Line 40500 – Federal foreign tax credit
Note: Line 40500 was line 405 before tax year 2019.
You may be able to claim the federal foreign tax credit for foreign income or profit taxes that you paid on income you received from outside Canada and reported on your Canadian tax return. Tax treaties with other countries may affect whether you are eligible for this credit.
Foreign income and foreign taxes must be converted to Canadian dollars. Use the Bank of Canada exchange rate in effect on the day that you received these amounts. If you received a monthly pension or multiple payments at different times during the year, use the average annual exchange rate. The average monthly rate and the daily rate are available by visiting the Bank of Canada.
The Canada Revenue Agency (CRA) will also generally accept a rate for that day from another source if that source meets all of the following conditions. The source is:
- widely available
- published by an independent provider on an ongoing basis
- recognized by the market
- used in accordance with well-accepted business principles
- used to prepare financial statements, if any
- used regularly from year to year
Other sources that the CRA would generally accept include rates from Bloomberg L.P., Thomson Reuters Corporation, and OANDA Corporation.
In certain circumstances described in the Income Tax Folio S5-F4-C1, Income Tax Reporting Currency, an average rate may be used to convert foreign currency amounts. Also refer to that Folio for more information about this or converting foreign amounts generally.
For more information about converting foreign income taxes paid, see Income Tax Folio S5-F2-C1, Foreign Tax Credit.
If you deducted an amount on line 25600 of your return for income that is not taxable in Canada under a tax treaty, do not report that income, or any tax withheld from it, in your foreign tax credit calculation.
Completing your tax return
Complete Form T2209, Federal Foreign Tax Credits, and enter the amount from line 12 on line 40500 of your return.
Complete Form 428 for your province or territory of residence to calculate the provincial or territorial foreign tax credit that you may be entitled to.
Keep all your documents in case the CRA asks to see them at a later date.
Filing a paper return
Attach your completed Form T2209 and documents, such as official receipts that show the foreign taxes that you paid and a note showing your calculations. If you paid taxes to the United States, attach your W-2 information slip, U.S.1040 return, U.S. tax account transcript, and any other supporting documents that apply.
If any of your documents are in a language other than English or French, the CRA needs a copy of the original documents written in the foreign language with an acceptable English or French translation.
To be acceptable, the signatory’s name has to be printed, in the Latin alphabet, and the translation has to meet one of the following conditions:
- be certified by an official with the authority to administer an oath or solemn declaration (commissioner of oaths, notary public, or lawyer) unless it was done by a translator who is a member in good standing of one of the provincial or territorial organizations of translators and interpreters of Canada
- have the seal and signature of an official from the foreign country’s embassy, high commission, or consulate confirming it is a true translation
- have the signature of the Chartered Professional Accountant (CPA) confirming it is a true translation
- have a written statement indicating the profession and the signature of a teacher, professor, or a religious leader confirming it is a true translation
To be acceptable, the taxpayer's name cannot be the same as the signatory's name.
Forms and publications
- Income Tax Package – Guide, return, and schedules
- Form T2036, Provincial or Territorial Foreign Tax Credit
- Form T2209, Federal Foreign Tax Credits
- Income Tax Folio S5-F2-C1, Foreign Tax Credit
- Interpretation Bulletin IT-506R ARCHIVED, Foreign income taxes as a deduction from income
- ITNEWS-31R2 ARCHIVED, Income Tax – Technical News, No. 31R2
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