Across Canada, corporations follow province-specific rules to claim foreign tax credits. The British Columbia foreign tax credit applies to taxes paid to a foreign government on non-business income.
The BC foreign tax credit reduces the provincial tax payable. The rules and regulations surrounding its use differ from those related to the federal foreign tax credit, and from regulations applying to some other provinces including Quebec and Ontario.
What qualifies as foreign non-business income?
For the purposes of claiming a BC foreign tax credit, foreign non-business income includes:
- pension income
- employment income
- director’s fees
Capital gains and losses on publicly traded stocks may be considered foreign income if they were traded on a foreign stock exchange. Certain details will apply, and it is always recommended to contact a business tax accountant if you are unsure whether your non-business income qualifies for the credit.
What counts as a foreign government?
According to the BC Income Tax Act, a foreign government may be the government of a state, province or other political subdivision of a country other than Canada.
Who is eligible for the BC foreign tax credit?
The BC foreign tax credit is available to corporations that:
- Are permanently based in British Columbia
- Are based (resident) in Canada during the entire tax year
- Have foreign investment income for the tax year
You can only claim this tax credit if the foreign non-business income tax paid is greater than the federal foreign non-business income tax credit deductible for that year.
Numerous other eligibility requirements may apply.
How to apply for the BC foreign tax credit
You will need to complete the T2SCH21 Federal and Provincial or Territorial Foreign Income Tax Credits form to claim the BC foreign tax credit.
A claim must be made separately for each province or territory for which you are attempting to qualify for a credit. Separate calculations must also be made for each foreign country where you paid taxes.
T2inc can help you claim your BC foreign tax credit
As experienced business tax professionals, T2inc can help you navigate the BC foreign tax credit application process. With specialized services designed specifically for T2 corporate income tax returns, our team is ready to provide the guidance you need to qualify for reduced provincial tax payments.
Contact us today to save money on your BC corporate income tax return.