Federal foreign business income tax credit
grant_single|update May 3, 2025
Canada
Offsets Canadian taxes for business income taxed abroad
grant_single_labels|summary
grant_single|eligibleFinancing
- grant_single|noCondition
grant_single|deadlines
- grant_single|timelineUnspecified
grant_single|financingType
Tax Credits
grant_single|eligibleIndustries
- grant_single|allIndustries
grant_single|grantors
- Government of Canada
grant_single|status
grant_card_status|open
grant_single_labels|preview
The Federal Foreign Business Income Tax Credit allows Canadian corporations to reduce their Part I tax by claiming credits for foreign taxes paid on business income earned abroad, specifically for each foreign country where income was generated. There is no stated maximum funding amount; the program aims to prevent double taxation on foreign business income, with eligibility tied to corporations paying foreign tax on business profits.
grant_single_labels|terms_and_conditions
- The credit can be carried back to the 3 previous tax years or carried forward for 10 tax years if unused.
- The amount of tax credit claimed must correspond to the foreign business income tax paid and is limited to reducing the Part I tax relating to income from the same foreign country.
grant_single_labels|projects
- Operating a business and generating income in a foreign country that is subject to foreign income or profits tax.
grant_single_labels|admissibility
- The applicant must be a corporation that has paid foreign tax on income or profits earned from operating a business in a foreign country.
- The corporation must be subject to Part I tax in Canada.
- The foreign business income must not be exempt from tax in Canada under an income tax treaty.
grant_eligibility_criteria|who_can_apply
- Corporations operating businesses in foreign countries that have paid foreign business income tax
grant_eligibility_criteria|who_cannot_apply
- Companies seeking credits for foreign tax paid on income that is exempt from tax in Canada under an income tax treaty.
grant_eligibility_criteria|eligible_expenses
- Foreign business income taxes paid on income or profits earned by the corporation from operating a business in a foreign country, when not exempted under an income tax treaty.
grant_eligibility_criteria|zone
- Corporations operating and paying tax in Canada.
grant_single_labels|apply
1
Confirm eligibility for credit
- Review the eligibility to ensure your corporation has paid foreign tax on income or profits earned from business operations in a foreign country
- Confirm that the foreign tax does not relate to income exempted under an income tax treaty with Canada
2
Complete Schedule 21 Part 2
- Complete Part 2 of Schedule 21 for each foreign country where business income tax was paid
- Calculate the foreign business income tax credit separately for each country
- Use additional Schedules if necessary
3
Calculate and report total credit
- Add all allowable foreign business income tax credits in column J of Schedule 21
- Enter the total allowable credits on line 636
4
Establish continuity of unused credits
- Complete Part 3 of Schedule 21 to document the continuity of unused credits, including credits expired, transferred, deducted, or carried back
- Ensure continuity and proper application for each country
- Use additional schedules if necessary
5
Claim carryback or carryforward credits
- To carry back unused credits, complete Part 4 of Schedule 21
- Carry unused credits back up to 3 years and forward up to 10 years
- Use credits to reduce Part I tax for the same foreign country
6
Submit tax return and documentation
- Complete all relevant schedules and documentation
- Submit your corporate income tax return with Schedule 21 and supporting documents to the Canada Revenue Agency
grant_single_labels|otherInfo
- If foreign tax is paid on income that is exempt from tax in Canada under an income tax treaty, it does not qualify for this credit.
- Foreign exploration and development expenses must be deducted on a country-by-country basis when calculating income from foreign sources.
- Carryback of unused credits is permitted for up to 3 previous tax years; carryforward is allowed for up to 10 tax years.
- The credit is determined separately for each country and must be tracked accordingly on the required forms.
Apply to this program
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