Personal Tax Planning: Foreign Tax Credits for Taxpayers with Cross-Border Employment Income

Abstract

Foreign tax credits are an important mechanism to provide relief from double taxation of foreign-source income. With respect to cross-border employment income earned by Canadian taxpayers, there are multiple issues that may create significant complexity and potentially limit the availability of foreign tax credits. In this article, the authors provide an overview of the mechanics of claiming foreign tax credits under the Canadian Income Tax Act and the relevant provisions in certain bilateral income tax treaties. They also review some relevant technical interpretations issued by the Canada Revenue Agency and legislative jurisprudence in Canada with respect to cross-border employment income sourcing and the availability of foreign tax credits on such income.