Federal foreign non-business income tax credit
grant_single|update May 3, 2025
Canada
Reduces double taxation on foreign non-business income for corporations
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 Non-Business Income Tax Credit provides Canadian residents and authorized foreign banks with a tax credit to prevent double taxation on non-business income earned and taxed in foreign countries, such as dividends, interest, and capital gains. There is no specified maximum funding amount, as the credit is applied to reduce Part I tax based on the amount of eligible foreign non-business income tax paid.
grant_single_labels|projects
- Claiming a tax credit to reduce double taxation on non-business income (such as dividends, interest, and capital gains) earned in a foreign country.
- Applying for tax relief on non-business income earned abroad and taxed by a foreign government.
grant_single_labels|admissibility
- The applicant must be a Canadian resident corporation.
- The applicant must have earned non-business income from a foreign country that was taxed by that foreign country.
- The applicant must not include any income that is exempt from tax in Canada under an income tax treaty.
- The applicant may be an authorized foreign bank with Canadian banking business from foreign sources.
grant_eligibility_criteria|who_can_apply
- Canadian resident corporations earning non-business income from foreign countries
- Authorized foreign banks conducting Canadian banking business with sources in foreign countries
grant_eligibility_criteria|who_cannot_apply
- Companies seeking credit for foreign tax paid on income that is exempt from tax in Canada under an income tax treaty.
- Businesses attempting to claim the credit for dividends received from foreign affiliates.
- Corporations with only income from operating a business in a foreign country, rather than non-business income.
grant_eligibility_criteria|eligible_expenses
- Foreign non-business income tax paid on dividends earned in a foreign country.
- Foreign non-business income tax paid on interest income from a foreign country.
- Foreign non-business income tax paid on capital gains from a foreign country.
grant_eligibility_criteria|zone
- Companies based in Canada.
grant_single_labels|apply
1
Collect and review financial documents
- Gather all relevant documentation on foreign non-business income earned
- Identify countries where foreign taxes were paid
- Ensure the income qualifies under the credit requirements
2
Complete Schedule 21 for each country
- Fill out Part 1 of Schedule 21 for each country where foreign income tax was paid
- Ensure accurate calculations for each country separately
- Use additional Schedules if required for multiple countries
3
Calculate and enter total credit
- Add all allowable foreign non-business income tax credits in column I of Schedule 21
- Enter the total allowable credit or a lesser amount on line 632
- Verify all figures for accuracy before proceeding
4
Attach and submit with tax return
- Attach completed Schedule 21 to your federal tax return
- Ensure all supporting documents are included
- Confirm compliance with tax treaty exemptions if applicable
grant_single_labels|otherInfo
- The credit applies to non-business income such as dividends, interest, and capital gains from foreign sources, but not to income exempt under tax treaties.
- If unclaimed federal credits remain, they may be claimed as provincial or territorial foreign tax credits.
- You may deduct non-business foreign income tax instead of claiming the credit under subsection 20(12).
- Calculations must be performed separately for each country; use additional Schedules if necessary.
Apply to this program
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