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Federal foreign business income tax credit
Tax relief for foreign business income taxes
Last Update: April 9, 2026
Funding available
Varies by project
Timeline
- Open continuously
Location
Canada
Overview
This federal tax credit helps corporations avoid double taxation on foreign business income tax paid to another country. Use Schedule 21 to calculate the credit for each foreign country and claim the allowable amount against Part I tax.
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Opportunity Score
Moderate potential, but conditions must align.
At a glance
Funding available
Financing goals
- No objectives are currently available
Eligible Funding
- Varies by project
Timeline
- Open continuously
Eligible candidates
Eligible Industries
- All industries
Location
- Canada
Legal structures
- For-profit business
Annual revenue
- All revenue ranges
Organisation size
- All organization sizes
Audience
- All groups
Next Steps
1
Determine your project
2
Validate your eligibility
Activities funded
- Operating a business in a foreign country
- Earning income or profits from foreign business operations
Documents Needed
- Schedule 21, Federal and Provincial or Territorial Foreign Income Tax Credits and Federal Logging Tax Credit
- Supporting proof of foreign tax paid
- Foreign tax return and receipts, if applicable
- Supporting documents in English or French, if original records are in another language
Official resources
Eligibility
Who is eligible?
- Canadian-resident corporations
- Authorized foreign banks
Who is not eligible
- Corporations claiming tax on income exempt under a tax treaty
- Non-corporate taxpayers
Eligible expenses
- Foreign business income taxes paid to another country
- Foreign exploration and development expenses, as deducted in the income calculation
Ineligible Costs and Activities
- Foreign tax paid on income exempt from tax in Canada under a tax treaty
- Foreign tax paid on income that is not business income
- Foreign tax already claimed as a provincial or territorial foreign tax credit
Eligible geographic areas
- Canada
- Foreign countries where the business income was earned
How to apply
- Step 1
- Download Schedule 21 and open it in Acrobat Reader.
- Step 2
- Complete Part 2 for the federal foreign business income tax credit.
- Calculate the credit separately for each foreign country.
- Step 3
- Add the allowable credits in column J of Schedule 21.
- Enter the total credit, or a lesser amount, on line 636 of the T2 return.
- Step 4
- If needed, complete Part 3 for unused credits or Part 4 for a carryback claim.
Processing and Agreement
- The claim is reviewed through the corporation’s tax return and Schedule 21.
- Foreign business income tax credits are calculated separately for each country.
- Unused credits may be tracked for carryback or carryforward purposes.
Additional information
- Use Schedule 21 to calculate the credit.
- For business income tax, the credit is calculated separately for each foreign country.
- Unused business income tax credits can be carried back 3 years and forward 10 years.
- The credit can only reduce Part I tax on income from the same foreign country.
Frequently Asked Questions about the Federal foreign business income tax credit Program
What is the Federal foreign business income tax credit?
This federal tax credit helps corporations avoid double taxation on foreign business income tax paid to another country. Use Schedule 21 to calculate the credit for each foreign country and claim the allowable amount against Part I tax.
Who is eligible for the Federal foreign business income tax credit program?
To be eligible for the Federal foreign business income tax credit program, you must:
Corporation paying foreign business income tax
Business income earned in a foreign country
Claim filed on Schedule 21
What expenses are eligible under Federal foreign business income tax credit?
Operating a business in a foreign country
Earning income or profits from foreign business operations
Where is the Federal foreign business income tax credit available?
The Federal foreign business income tax credit program is available across Canada.
Is the Federal foreign business income tax credit a grant, loan, or tax credit?
Federal foreign business income tax credit is a Tax Credits
Who are the financial supporters of the Federal foreign business income tax credit?
Federal foreign business income tax credit is funded by Government of Canada