Table of Contents
- 🛫 Reporting Foreign Income & Filing the T1135 Foreign Income Verification Statement 🇨🇦🌍
- 🧾 Understanding When You Need to File the T1135 🇨🇦🌍
- 🛫 Reporting Foreign Property & T1135: The Ultimate Beginner Guide for Canadian Tax Preparers
- 🌍 Frequently Encountered T1135 Scenarios & Common Oversights for Foreign Property Reporting
- 🇨🇦📈 Reporting Foreign Stocks Held in Canadian Brokerage Accounts (T1135 Guide)
- 🌍 Foreign Tax Credit & Deduction Guide (FTC) for Canadian Tax Preparers 🇨🇦💼
🛫 Reporting Foreign Income & Filing the T1135 Foreign Income Verification Statement 🇨🇦🌍
Foreign investments can offer great returns — but they also add tax reporting responsibilities! As a Canadian taxpayer or aspiring tax-preparer, understanding how to report foreign income and when to file the T1135 Foreign Income Verification Statement is essential.
This guide breaks everything down in beginner-friendly language so you can confidently handle foreign income reporting.
🌐 What Counts as Foreign Income?
Foreign income is money earned outside Canada, including:
💵 Dividends from foreign companies
📈 Capital gains from selling foreign investments
🏡 Rental income from foreign property
🏦 Interest from foreign bank accounts
👉 If you earn foreign income, it must be reported on your Canadian tax return — even if you already paid tax in another country.
🏛️ What is the T1135 Form?
The T1135 is a foreign asset disclosure form, not a tax calculation form.
📌 Purpose: To disclose Specified Foreign Property held during the year.
❗ It does not affect your tax payable directly — it’s strictly reporting.
💡 What is “Specified Foreign Property”?
This includes assets located outside Canada that may generate income:
| ✅ Reportable | ❌ Not Reportable |
|---|---|
| Foreign stocks (e.g., Apple, Google) | Personal-use vacation property |
| Foreign rental properties | Cars, clothing, art abroad |
| Foreign mutual funds & ETFs | Property used only personally (no income) |
| Foreign bank accounts | RRSP/TFSA assets invested in foreign stocks (held through Canadian broker) |
🎯 Key Rule: If the cost of foreign property exceeded $100,000 CAD at any time during the year, filing the T1135 is required.
⏳ When Must You File the T1135?
| Timing Requirement | Deadline |
|---|---|
| Required if cost > $100K at any point | ✅ Yes |
| Must be filed with tax return | ✅ Same due date |
| Filed separately from tax return? | ❌ No |
⚠️ Even if you sold foreign assets before year-end, you still must file if value exceeded $100K at any point.
🤑 Penalties — Why This Form Matters
Missing or filing late = automatic penalties
| Penalty Type | Amount |
|---|---|
| Failure to file | $25/day up to $2,500 |
| Gross negligence | Up to $12,000 or more |
🚨 CRA issues these penalties aggressively. Avoid filing late at all costs!
📊 Common Example
| Example | Filing Required? |
|---|---|
| Owns $95,000 CAD in U.S. stocks all year | ❌ No |
| Portfolio hit $101,000 in July, then fell | ✅ Yes |
| Owns condo in Greece used personally only | ❌ No |
| Owns rental condo in Greece | ✅ Yes |
📁 Where Do You Get Foreign Income Details?
Most financial institutions now provide:
📄 Foreign Investment Reports
📈 Annual Gain/Loss summaries
💰 Dividend/Interest statements
✅ Use these reports to complete the T1135 — no guessing required.
🧠 Pro Tip — When in Doubt, File!
If you’re unsure whether:
- The property is personal-use or rental
- Value exceeded $100,000
- Asset qualifies as foreign property
📎 File the T1135 anyway.
👉 There is no penalty for filing unnecessarily, but there is for missing it.
📦 Quick “Do I File T1135?” Checklist
| Question | Yes = Must File |
|---|---|
| Did foreign property cost exceed $100K CAD at any time? | ✅ |
| Is the asset income-producing? | ✅ |
| Is it held outside registered accounts (RRSP/TFSA)? | ✅ |
| Is foreign real estate used to earn income? | ✅ |
📝 Tax Form Tips for Beginners
✔️ Gather foreign investment statements
✔️ Convert values to CAD using Bank of Canada rates
✔️ Report dividends & capital gains on the T1 return
✔️ Use T1135 only for disclosure, not tax calculation
📚 Special Info Box
🎯 CRA Rule: It’s the cost amount, not market value, that determines the $100K threshold.
🧾 Foreign mutual funds held inside a TFSA or RRSP?
No T1135 needed — because assets are held inside Canadian registered accounts.
🚀 Final Takeaway
Foreign investing is exciting — but with it comes responsibility. The T1135 helps the CRA track foreign assets and ensure proper reporting.
✅ Report all foreign income
✅ File the T1135 if cost > $100K anytime during the year
✅ Avoid penalties by filing on time
✅ When unsure — file!
🧾 Understanding When You Need to File the T1135 🇨🇦🌍
The T1135 – Foreign Income Verification Statement is one of the most commonly misunderstood Canadian tax forms. Missing it or filing incorrectly can trigger automatic penalties, so every tax preparer and investor must understand when this form needs to be filed.
This section is your complete, beginner-friendly guide to recognizing T1135 filing requirements confidently ✅
🌟 What Is the T1135?
The T1135 is a foreign asset disclosure form required by the CRA to report Specified Foreign Property when the total cost exceeds $100,000 CAD at any time during the year.
🛑 This is not a tax calculation form — it’s a reporting and compliance form.
✅ When You MUST File the T1135
You must file this form if:
✔️ You owned Specified Foreign Property during the year
✔️ The total cost exceeded $100,000 CAD at any point, even for one day
✔️ Foreign assets produced income (dividends, capital gains, rent, interest)
✔️ Foreign stocks held inside a Canadian brokerage account exceed $100,000 cost
💡 Key point: It doesn’t matter what the investment was worth on December 31 —
it’s based on the highest cost during the year.
❌ When You Do NOT Need to File
🚫 Personal-use foreign property (e.g., vacation home used only by family)
🚫 Foreign assets held inside RRSP, RRIF, TFSA, RESP
🚫 Foreign stocks worth less than $100K in cost
🚫 Foreign business assets used actively in business
🚫 Foreign property that never crossed the $100K cost threshold during the year
📦 What Counts As Specified Foreign Property?
| Category | Included? |
|---|---|
| U.S. & foreign stocks (even inside Canadian brokerage accounts) | ✅ |
| Foreign rental real estate | ✅ |
| Foreign bank accounts | ✅ |
| Foreign mutual funds & ETFs (non-registered) | ✅ |
| Personal-use real estate overseas | ❌ |
⭐ Tip: Personal property becomes reportable if you rent it out — even occasionally.
💰 Example: Determining Filing Requirement
| Asset | Cost | Report? |
|---|---|---|
| UK stock held | $90,000 CAD | No (on its own) |
| Apple shares bought & sold | $10,920 CAD | No (on its own) |
| Total cost | $100,920 CAD | ✅ Must file |
Even if the Apple shares were sold earlier in the year…
❗ The fact that total cost exceeded $100,000 at ANY time means filing is required.
🏦 Beware: Stocks in Canadian Brokerage Accounts Count!
Many taxpayers mistakenly think foreign shares in a Canadian brokerage don’t count.
But if your client has:
- CIBC Investor’s Edge account holding US stocks ✅
- RBC Direct Investing account holding UK company shares ✅
They need T1135 filing if total cost > $100K.
💬 Pro tip: Always review foreign investment reports month-by-month.
The highest monthly cost is what matters — not just year-end.
📆 Filing Deadline & Codes Matter
| Taxpayer Type | Deadline |
|---|---|
| Regular taxpayer | April 30 |
| Self-employed individual | June 15 |
⚠️ IMPORTANT:
When filing the T1135, you must select the correct filing deadline code.
Choosing the wrong one can trigger an automatic late filing penalty — even if filed on time!
🪂 Penalties for Missing or Late Filing
| Penalty Type | Amount |
|---|---|
| Late filing | $25/day up to $2,500 |
| Gross negligence | Up to $12,000+ |
🚨 CRA penalties on this form tend to be automatic. Avoid errors!
🧾 What You Will Need to Review
🔍 Foreign investment statements
📊 Monthly cost & fair market value summary
💵 Dividend & interest income reports
🏘️ Foreign rental property records (if applicable)
📂 Broker foreign reporting package
Everything must reconcile with:
- Schedule 3 (capital gains)
- T5/T5008 slips (foreign income & securities)
- Foreign rental income forms
- FTC (Foreign Tax Credit) claims
📌 Pro Tax Preparer Checklist
✅ Did foreign property cost exceed $100K at ANY time?
✅ Did you check all foreign security accounts?
✅ Did you review monthly values, not just year-end?
✅ Did you include rental property held abroad?
✅ Did you pick the correct due-date code?
✅ Did you reconcile income with tax return schedules?
📎 Pro Tip Box 💡
When in doubt — file the T1135.
Filing unnecessarily = ✅ No penalty
Failing to file when required = 🚫 Automatic penalty
This rule protects you and your client!
🪙 Quick Summary
| Rule | Key Takeaway |
|---|---|
| Threshold | $100,000 cost at any time in year |
| Includes | Foreign stocks, property, accounts |
| Excludes | Personal-use property, RRSP/TFSA holdings |
| Deadline | Same as tax return |
| Penalty | $2,500+ automatic if late |
🎓 Final Words
Mastering the T1135 is a critical skill for tax professionals.
This form is easy once you understand the rules — but missing it can be costly.
💼 Stay organized
🔍 Review investment statements carefully
🧠 Remember: ANY time during the year, not just year-end
You’re building strong tax expertise — great job sticking with it! 🙌
🛫 Reporting Foreign Property & T1135: The Ultimate Beginner Guide for Canadian Tax Preparers
Canadian taxpayers who own certain foreign property valued over $100,000 CAD must file Form T1135 – Foreign Income Verification Statement. As a tax preparer, understanding this form is critical — failure to file can lead to penalties up to $2,500–$10,000+. 😱
This guide walks you through what counts as foreign property, when to file, simplified vs detailed reporting, and practical scenarios you’ll see in real life.
🌎 What is “Specified Foreign Property”?
| ✅ Included (Report on T1135) | ❌ Not Included (Do NOT report) |
|---|---|
| Foreign real estate held to earn income (rental property) 🏘️ | Foreign real estate used personally only (vacation home you don’t rent) 🏡 |
| Foreign bank accounts 💵 | Personal use property (cars, clothing, furniture overseas) 🚗 |
| Stocks of non-Canadian corporations 🌐 | Canadian mutual funds investing abroad 🇨🇦 |
| Crypto/Foreign brokerage accounts 📈 | RRSPs & TFSAs with foreign investments (held in Canadian institutions) |
| Foreign business investments 🏢 | Property used in an active foreign business |
💡 Easy rule: If it’s foreign and can generate income ➜ likely reportable.
🧮 When Does T1135 Apply?
You must file T1135 if the total cost of specified foreign property exceeds:
📌 $100,000 CAD at any time during the year
✅ Even if held only for 1 day
✅ Use original cost, not current value
✅ Exchange rate conversion required (use Bank of Canada average or transaction rate)
📑 Reporting Methods
| Method | When Used | Requirements |
|---|---|---|
| Simplified Reporting | Total cost $100,000 – $250,000 | Summary info by category |
| Detailed Reporting | Total cost over $250,000 | Specific details per property & account |
📝 Tip: When unsure, filing is safer. CRA penalties are harsh!
🏠 Example Scenario: Canadian With U.S. Rental Condo
Situation:
A Canadian owns a condo in Florida → rents it seasonally.
| Item | Value |
|---|---|
| Purchase cost | $260,000 USD |
| Use | Rental |
| Also has US bank account | Yes |
| Income earned | Rental income + bank interest |
✅ T1135 filing required
✅ Must use detailed reporting (> $250K)
Required info includes:
- Country: 🇺🇸 United States
- Address of property
- Cost converted to CAD
- Rental income reported on Canadian return
- US bank balance: max during year & year-end
🚨 Red flag: T1135 filed but no rental income reported on the T1 → CRA audit trigger!
🏡 Variation: Same Property, Personal-Use Only
If the Florida condo is never rented and only used personally:
| Property Type | T1135 Requirement |
|---|---|
| Personal-use home | ❌ Not reported |
| U.S. bank account > $100K | ✅ Must report |
| All foreign assets < $100K | ❌ No T1135 filing |
✅ If unsure — file anyway. Better to be safe than pay penalties.
💡 Common Mistakes to Avoid
| Mistake | Correction |
|---|---|
| ❌ Forgetting foreign bank accounts | ✅ Must report if > $100K and part of foreign property total |
| ❌ Reporting current market value | ✅ Use cost |
| ❌ Failing to report associated income | ✅ Ensure rental/interest appears on tax return |
| ❌ Not converting USD to CAD | ✅ Use correct exchange rates |
| ❌ Thinking vacation homes always exempt | ✅ Exempt only if 100% personal use |
🧠 Quick Checklist for T1135 Compliance
✅ Did the client hold foreign property?
✅ Was total cost > $100,000 CAD?
✅ Property type confirmed (income-producing vs personal)?
✅ Correct exchange rate used?
✅ Income reported on T1 return (rental, interest)?
✅ Used correct method (simplified/detailed)?
⭐ Pro Tip: Always ask clients with U.S. property or investments about rental use & foreign accounts.
📦 Must-Know Notes
📌 T1135 is an information return — it does not calculate tax.
You still must separately report income on the tax return.
📌 Missing T1135?
Voluntary disclosure may avoid penalties if done before CRA contacts client.
⚠️ Penalty Examples
| Issue | Penalty |
|—|—|
Failing to file | $25/day up to $2,500 |
Gross negligence | Up to $10,000+ |
🚀 Final Takeaway
Becoming a tax pro means spotting foreign property early.
A simple conversation like:
“Do you own a home or bank account outside Canada?”
…can save your client from thousands in penalties — and make you look like a superstar tax preparer! 🌟
🌍 Frequently Encountered T1135 Scenarios & Common Oversights for Foreign Property Reporting
Canadian taxpayers who own Specified Foreign Property (SFP) need to fall under strict compliance rules — and as a tax preparer, you will frequently run into “snowbird” clients or newcomers with foreign assets. This guide breaks down real-world situations, CRA rules, and common mistakes so you can confidently navigate T1135 filing requirements.
🏡 Foreign Vacation Homes: Personal Use vs Rental Use
Many Canadians own property in the U.S. (especially Florida 😎). The big question:
Does owning a foreign vacation property mean you must file T1135?
| Scenario | T1135 Required? | Why |
|---|---|---|
| Client owns foreign condo, uses it 100% personally | ❌ No | Personal use property is excluded |
| Client rents condo part-time + uses it part-time & intends profit | ✅ Yes | Held primarily to earn income |
| Client rents occasionally to cover costs (break-even goal) | ❌ No | No profit intent = personal use |
✔️ Key Test: Is the client intending to make a profit?
If the property’s primary purpose is investment/rental → report it.
⚠️ Best Practice: When in doubt → file anyway. Filing when not required is not penalized.
🪧 Vacant Land Abroad
🌱 Vacant land outside Canada is SFP — even if no income is earned.
| Why? | It is considered an investment asset, not personal-use property. |
✅ Must report if cost > $100,000 CAD
❌ No rental income required to trigger reporting
🛡️ Foreign-Issued Life Insurance Policies
Foreign life insurance policies can be SFP.
| What CRA says | Reportable if held directly |
|---|---|
| Cost basis = Adjusted Cost Base (ACB) | Often approximate using cash surrender value |
| Need info? | Contact the insurer or agent for valuation |
✈️ New Immigrants to Canada (Important Rule)
| Immigrant Scenario | T1135 Requirement |
|---|---|
| First year becoming resident | ❌ Do not file T1135 |
| Future years | ✅ File if asset > $100,000 |
| Cost base | Fair market value on day they became a resident |
Example:
A new resident with $200K USD land overseas does not file in first year, but must in future years, using FMV on arrival date as cost base.
💬 Client Questions You Will Hear Often
| Client Question | Proper Tax Response |
|—|—|—|
“I own a condo in Florida. Do I file?” | Depends — personal use vs rental |
“I only rent to family to cover costs.” | Likely personal use, no T1135 |
“I have vacant land in the U.S.” | ✅ Report if > $100K |
“I bought a life insurance policy overseas.” | ✅ Likely reportable |
“I just moved to Canada — do I report now?” | ❌ Not in the first year |
❗Common Oversights (Avoid These!)
| Mistake | Correct Practice |
|---|---|
| Failing to ask about rental intent | Always determine profit motive |
| Not reporting vacant land | Report > $100K even without income |
| Forgetting about foreign life insurance | Confirm ACB via insurer |
| Reporting at market value instead of cost | Use cost basis (or FMV on immigration) |
| Assuming occasional rental = investment | Ask purpose: profit? or cost recovery? |
📦 Pro-Tips for New Tax Preparers
✅ Always ask:
“Do you own property or accounts outside Canada?”
✅ Document intent for clients with foreign vacation property
✅ When unsure whether income-producing → file T1135
✅ Cross-check that rental/interest income appears on the return when filing T1135
✅ Use correct exchange rate when calculating cost
🛑 Penalty Reminder
Missing or incorrect T1135 filing risks:
| Penalty Type | Amount |
|---|---|
| Basic failure to file | Up to $2,500 |
| Gross negligence | $10,000+ |
Filing even when unsure protects against penalties.
🧾 Quick Decision Tree
| Situation | T1135 Needed? |
|---|---|
| Foreign property used only personally | ❌ No |
| Foreign property generating income or intended to generate income | ✅ Yes |
| Vacant land overseas | ✅ Yes |
| Foreign life insurance | ✅ Yes |
| New immigrant first year | ❌ No |
| Unsure | ✅ File to be safe |
📘 Final Takeaway
Foreign property tax situations are common, nuanced, and high-risk.
If your client is a snowbird, a new immigrant, or owns any asset abroad, always:
- Understand use
- Confirm profit intention
- Verify value in CAD
- File T1135 when in doubt
Mastering these rules early will make you a trusted tax specialist! 💼✅
🇨🇦📈 Reporting Foreign Stocks Held in Canadian Brokerage Accounts (T1135 Guide)
When your clients invest in U.S. or international stocks through Canadian platforms like TD Direct Investing, RBC Direct, Questrade, or BMO InvestorLine, they may need to file Form T1135 – Foreign Income Verification Statement.
This is one of the most common and confusing areas for new tax preparers — so let’s break it down in a simple, fool-proof way.
🌍 When Do You File T1135?
You must file T1135 when a taxpayer owns Specified Foreign Property costing over $100,000 CAD at any point in the year.
✅ Foreign stocks held in Canadian brokerage accounts count!
Examples of foreign property in a Canadian brokerage:
- Apple 🍏 (AAPL)
- Google 💻 (GOOGL)
- Microsoft 🪟 (MSFT)
- Tesla 🚗 (TSLA)
- Any U.S./international ETFs (e.g., VTI, QQQ, VXUS)
💡 It doesn’t matter where the account is — it matters where the investments are located.
🧮 What Counts Toward the $100,000 Threshold?
Use cost base, not market value.
| Condition | T1135 Needed? |
|---|---|
| Foreign investments cost ≤ $100K all year | ❌ No |
| Foreign investments cost > $100K at any time | ✅ Yes |
| Dropped below $100K later | ✅ Still yes |
📌 Even if your December statement is under $100K — check earlier months!
🧾 Two Reporting Methods
| Investment Amount | Reporting Method Required |
|---|---|
| $100,000 – $250,000 | Simplified Method (Part A) |
| Over $250,000 | Detailed Method (Part B) |
✅ Simplified Method (Most Common!)
If cost is between $100K and $250K, you only report:
| Field | Example |
|---|---|
| Country | 🇺🇸 USA |
| Total foreign income earned | Dividends: $1,450 CAD |
| Total capital gains | $2,720 CAD |
That’s it — no listing each stock!
📊 Detailed Method (Over $250K)
If foreign holdings cost over $250K, you must report:
- Brokerage name (e.g., TD Direct Investing)
- Country (e.g., USA)
- Maximum fair market value during the year
- Year-end fair market value
- Foreign income (dividends)
- Realized capital gains
👍 Good news: Brokerages now provide T1135 support reports so you don’t calculate manually.
📁 Reports You Will Need From Brokerage
Brokerages provide:
📄 Foreign Property Book Value Report
- Shows month-by-month cost base
- Helps determine if cost > $100K
📄 Foreign Property Fair Market Value Report
- Year-end value
- Maximum value during year
🧾 Income Report
- Foreign dividends
- Foreign withholding tax
- Realized gains/losses
⭐ Expect 4–5 pages if client owns many stocks.
🚨 CRITICAL Reminder
✅ Filing T1135 is required even if the client had no gains/income
✅ Reporting is by country, not individual stock
❌ Foreign property in TFSA/RRSP is not reportable
🧠 Pro Tax-Preparer Tips
📍 Get all investment accounts from client (TD, BMO, RBC, Questrade, Wealthsimple, etc.)
📍 Review each month, not just year-end
📍 Use average exchange rate if values reported in USD
📍 If unsure → file T1135 to avoid penalties
⚠️ Frequent Mistakes Beginners Make
| Mistake | Correct Approach |
|---|---|
| Thinking Canadian brokerage = no reporting | Foreign investment, not foreign account |
| Checking only December balance | Must check all months |
| Reporting market value instead of cost | Threshold is based on cost base |
| Forgetting capital gains | Must be reported |
| Ignoring withheld foreign tax | Needed for FTC (Foreign Tax Credit) |
✅ Quick Decision Flow
Does client hold foreign investments?
⬇️
Were assets ever > $100,000 cost?
- ❌ No → No T1135
- ✅ Yes → File T1135
Total Cost
- $100K–$250K → Simplified Method
- $250K → Detailed Method
📦 Checklist for Client
Ask client for:
- ✅ Year-end brokerage statements
- ✅ Foreign income slip / investment summary
- ✅ T1135 brokerage support report
- ✅ FX conversion if USD amounts shown
🏁 Key Takeaway
Foreign stocks in Canadian brokerage accounts absolutely count toward T1135 reporting.
👉 As a tax preparer, always ask clients about U.S. stocks — nearly everyone owns Apple or Tesla these days!
Master this process and you’ll handle one of the most high-value skills in Canadian tax practice. 💼🇨🇦
🌍 Foreign Tax Credit & Deduction Guide (FTC) for Canadian Tax Preparers 🇨🇦💼
Foreign income reporting is a high-review area by CRA and a common source of confusion for new tax preparers. This guide provides a beginner-friendly yet professional, practical framework to confidently handle foreign tax credits (FTC) and deductions on personal returns.
🎯 What Is the Foreign Tax Credit?
When a Canadian taxpayer earns income from another country — like interest, dividends, or mutual funds invested in foreign markets — the foreign country may withhold tax.
To prevent double taxation, Canada offers:
✅ Foreign Tax Credit (FTC) → reduces Canadian tax
✅ Foreign Tax Deduction (under section 20(11)/20(12)) → allowed when credit not fully used
🔑 Core Principle
Foreign income is taxed in BOTH countries — and Canada gives relief so you don’t pay twice.
💡 Common Foreign Income Examples
| Source | Typical Reporting Slip |
|---|---|
| US dividends from brokerage | T5 / brokerage report |
| Foreign income inside mutual funds | T3 / fund statements |
| Foreign rental / business income | Trust / foreign statements + manual entry |
🚫 IMPORTANT — No Canadian Dividend Credit
Foreign dividends do NOT receive the Canadian dividend tax credit.
Treat foreign dividends like foreign interest income for tax purposes.
📌 Step-By-Step FTC Logic (Simple Example)
Jason earns dividends from a UK company:
| Item | Amount |
|---|---|
| Foreign income | $10,000 |
| Foreign tax withheld (25%) | $2,500 |
| Canadian foreign tax credit allowed | $1,500 |
| Remaining amount deductible | $1,000 |
✅ Jason reports $10,000 income
✅ Claims $1,500 FTC
✅ Claims $1,000 deduction on line 23200 (20(11)/20(12) section)
CRA lets you deduct foreign tax not eligible for the FTC — so income isn’t unfairly taxed twice.
📊 Behind the Scenes: How Tax Software Handles FTC
Always use the Foreign Tax Credit Worksheet in the tax software:
Software automatically calculates:
- Maximum federal FTC (Form T2209)
- Provincial FTC limits
- Remaining deductible portion under 20(11)/20(12)
🧠 Pro tip: Manually overriding the software = errors & audits.
🧾 CRA Loves Reviewing This Area (Be Ready!)
CRA frequently reviews foreign tax deductions, especially when large mutual fund holdings exist.
Reason:
- CRA asks for foreign tax breakdown by country & security
- Mutual funds do not and cannot provide this level of detail
- A frontline CRA agent may deny the claim if they don’t understand
✅ This denial is WRONG
✅ Always file an objection
✅ Appeals officers routinely reverse it
📌 Never remove FTC claims just to avoid CRA reviews.
Always enter exactly as per T slips.
🚨 What NOT To Do
| ❌ Don’t | ✅ Do |
|---|---|
| Don’t skip claiming foreign tax just to avoid a review | Always claim according to tax slips |
| Don’t treat foreign dividends like Canadian dividends | Report as foreign investment income |
| Don’t ignore CRA denial | Appeal immediately — you will win |
🧠 Key Rules to Remember
✅ Claim foreign taxes paid exactly as stated on slips
✅ Use software FTC worksheet
✅ Report gross foreign income (not net after tax)
✅ Appeal if CRA disallows foreign fund deductions
✅ Deduct remainder foreign tax that cannot be credited
🧾 Cheatsheet: FTC vs Deduction
| Term | What it does | Where applied |
|---|---|---|
| Foreign Tax Credit | Reduces Canadian tax | Form T2209 |
| Foreign Tax Deduction (20(11)/20(12)) | Deducts unclaimed foreign tax | Line 23200 |
🧰 Quick Practical Tips
💼 Get full brokerage tax package
📎 Attach foreign tax calculation sheets if reviewed
📊 Watch for mutual fund foreign tax amounts on T3 slips
✉️ Use Notice of Objection when CRA incorrectly denies deduction
🧮 Let software calculate the FTC — do not override
📦 Example Data Flow
| Slip/Report | Entry |
|---|---|
| T5 foreign income box → Foreign income section | |
| Foreign tax withheld box → FTC worksheet | |
| Software → Calculates credit & deduction automatically |
✅ Final Checklist for Tax Preparers
- Enter gross foreign income correctly
- Confirm foreign tax withheld amount
- Use tax software FTC worksheet
- Verify deduction under section 20(11)/20(12)
- Keep brokerage / T3 & T5 slips for proof
- Appeal any CRA denial — do NOT remove claims
🔔 Key Takeaway
Always claim the foreign tax relief your client is entitled to — and defend it.
The CRA may question it, but when handled properly, clients will always win appeals.
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