Cross-Border Taxation

Now more than ever, more and more Canadians are drawing earnings beyond Canada’s borders. From business income and rental properties to foreign shares, Canadians are working and investing outside the country, facing complicated tax challenges. If your earnings are coming from worldwide sources, be sure to understand your tax obligations.
December 15, 2022


Canadian residents are taxed on their cumulative income, from both foreign and domestic sources. Depending on the type of income (ie. fees, capital gains, investment or rental property), it must be reported as if it was sourced from within Canada.


All foreign income must be converted to Canadian dollars, using the Bank of Canada exchange rate in effect that day. If income was derived over a period of days or weeks throughout the year, the average annual foreign exchange rate should be used.


If taxes have been paid to any foreign country on the income earned, you may be able to claim a foreign tax credit (FTC) on your taxes, thereby reducing the Canadian tax on that income. The relevant foreign tax must have been paid to the country or jurisdiction where the service was provided to be eligible to be claimed as an FTC. These amounts should also be converted to Canadian dollars using the same exchange rates as the income.


In the case of athletes and entertainers performing in the U.S., income derived from performance fees/guarantees, endorsements, merchandise sales, royalties, and any other event-related income is generally subject to a 30 percent withholding tax. Be sure to report these foreign taxes paid at the time of your filing to claim any credits.


To prevent double taxation, Canada has negotiated international tax treaties with many countries/jurisdictions.



Canadian individuals, corporations, partnerships and trusts owning foreign investments and/or property costing more than $100,000 in Canadian currency in any given year, must report these investments on filing their income tax return.


Foreign property includes funds and bank accounts you hold, debt securities, shares of foreign corporations (even if they are held by a Canadian broker), shares held with foreign brokers, real estate, and other tangible and intangible properties located outside the country.


Foreign property does not include personal-use property or property for an active business, registered pension fund investments, or foreign investments held by Canadian registered funds. Personal-use property includes vacation property and listed personal property such as rare manuscripts, books or folios, stamps, coins, jewelry and works of art.



To report these investments, complete the Foreign Income Verification Statement (Form T1135) for inclusion with your tax return. The form requires specific details about the income generated, location of investments, maximum cost during the year, as well as gains or losses from the disposition from specified foreign property. Failure to disclose or late filing could result in penalties imposed by the Canada Revenue Agency, ranging from $25 per day, up to $12,000 and more, depending on the circumstances.


Canadians have been required to declare foreign property in excess of $100,000 since 1997. If you previously forgot to submit this form, you can submit a Voluntary Disclosure to avoid costly penalties. When you do this, include T1135 forms from previous tax years with your disclosure.



If you immigrated to Canada and became a resident, any property that you held or brought with you now forms a cost base when you became a resident. That cost base is its fair market value at the time when you became a resident. This becomes the cost base for calculating any potential capital gain or loss should you dispose of the property. There could be some exemptions for certain capital property dispositions, depending on a tax treaty between Canada and the country from which you emigrated.



Tax compliance can be challenging and arduous. At Manrkē, we ease the complexity and burden and unlock opportunities for your productivity. Connect with one of our finance specialists who understands your worth. Our success depends on your success.



Canada Revenue Agency: Foreign Reporting

Canada Revenue Agency: Foreign Income Verification Statement

Internal Revenue Service: Help for Foreign Athletes and Entertainers


-       Bessie Bullard

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