Foreign Tax Credits

Foreign tax credits (FTCs) are a cornerstone of Canada’s approach to mitigating international double taxation, and this module equips CPA professionals with the technical foundation and advanced strategies needed to apply them effectively. Rooted in section 126 of the Income Tax Act, the module begins by distinguishing between business and non-business foreign tax, outlining the income sourcing rules and eligibility criteria for claiming credits. Participants will learn how to apply the FTC limitation formula, understand when deductions under sections 20(11) and 20(12) may be more appropriate, and how to avoid common pitfalls such as mismatched tax years or excessive carryforward pools. The course also dives into the use of FTCs in complex scenarios such as foreign branches, capital gains, hybrid entities, and flow-through structures, and evaluates their interaction with tax treaties, including double-benefit risks and GAAR exposure. Special emphasis is placed on compliance expectations, including the use of CRA Forms T2209, T2036, and Schedule 21, and the documentation standards required to support a claim. By the end of the module, CPA professionals will be well-positioned to integrate FTCs into broader tax planning for both individuals and corporations operating globally.