Reporting foreign income

gestbr · ‎February 05, 2021

My client worked outside Canada and was paid 100K USD for his consulting services - do we report this income on line 130000 or as self employed income on T2125

Thanks,

Ron

kozakworld · ‎February 11, 2021

You would use the "Foreign" Tab to report this in Canadian currency. The Foreign tab should have a currency converter where you can choose the US AVG and convert it to Canadian for you. You would enter the income into the appropriate box, whether it be Employment Income, Capital Gain income, etc. The Foreign tab does not have a category for self-employ income. You would also enter the Foreign TAX paid on this same form in order to claim a foreign tax credit to prevent double taxation. However, you always have to check the Tax Treaty in force with that foreign country to know if you can claim a foreign tax credit. Not all countries have tax treaties with Canada, so for those countries, double taxation will take place.

The information from the foreign tab is transferred to the appropriate places on the tax return.
- Line 10400 for Employment Income

- T2209 - Federal Foreign Tax Credits and transferred to Line 40500 on the T1 Jacket

- T2036 - Provincial Foreign Tax Credits on the appropriate Foreign Tax Credit Line on the Provincial Tax form (xx428)

NB: Line 43700 (Total Income Tax Deducted) on the T1 Jacket does NOT include the Foreign Tax Paid.

Hope this helps.

View solution in original post

kozakworld · ‎February 11, 2021

You would use the "Foreign" Tab to report this in Canadian currency. The Foreign tab should have a currency converter where you can choose the US AVG and convert it to Canadian for you. You would enter the income into the appropriate box, whether it be Employment Income, Capital Gain income, etc. The Foreign tab does not have a category for self-employ income. You would also enter the Foreign TAX paid on this same form in order to claim a foreign tax credit to prevent double taxation. However, you always have to check the Tax Treaty in force with that foreign country to know if you can claim a foreign tax credit. Not all countries have tax treaties with Canada, so for those countries, double taxation will take place.

The information from the foreign tab is transferred to the appropriate places on the tax return.
- Line 10400 for Employment Income

- T2209 - Federal Foreign Tax Credits and transferred to Line 40500 on the T1 Jacket

- T2036 - Provincial Foreign Tax Credits on the appropriate Foreign Tax Credit Line on the Provincial Tax form (xx428)

NB: Line 43700 (Total Income Tax Deducted) on the T1 Jacket does NOT include the Foreign Tax Paid.

Hope this helps.

roymabroor · ‎March 17, 2021

My client lives in Canada and offer consulting services to US based company. He receive the payment in US currency in his Canadian bank account. Does this consider foreign income or self employment income?

gestbr · ‎December 30, 2021

I would consider this self employment income from consulting services

foreign income on canadian tax return is usually investment income

Cheers