There is no limit to the number of countries for which the corporation can claim a foreign income tax credit. Schedule 21 allows you to calculate foreign income tax credits country by country. Data pertaining to each individual country must therefore be indicated on separate lines.
This schedule is divided into two sections: Part 1 Federal foreign non-business income tax credit and Part 2 – Federal foreign business income tax credit.
Depending on the applicable provincial jurisdiction, the pertinent federal data is carried over to the following forms:
- Alberta: Schedule 4, Alberta Foreign Investment Income Tax Credit (Jump Code: A4);
- Québec: CO-17S.39, Foreign Non-Business Income Tax Credit (Jump Code: Q21);
- Other: Schedule 21 Supplementary, Provincial or Territorial Foreign Non-Business Income Tax Credit (Jump Code: 21S).
Chart “Summary per country for unused foreign business income tax credits”
This chart allows you to manage the carry forward of unused foreign tax credits over a 10‑year period under the rules enacted in subsection 126(2.3) of the Canadian Income Tax Act.
Thus, the inclusion of unused foreign tax credits in paragraph 126(2)(a) allows a taxpayer to carry any unused foreign tax credits from the current year back into the three immediately preceding tax years or forward into the next ten immediately following tax years (into the next seven taxation years if the end of the tax year in which the unused foreign tax credit has been calculated precedes March 23, 2004), subject to the rules in subsection 126(2.3). These rules provide that:
- the amount of foreign tax credit claimed under paragraph 126(2)(a) for a tax year is considered first to be in respect of Foreign Business income Tax for that year with any remainder considered to be a deduction in respect of unused foreign tax credits
- unused foreign tax credits must be utilized against Part I tax in the order in which they arose (for example, unused credits in respect of a particular country for the 2009 tax year must be applied before unused credits for 2010 in respect of that country); and
- an amount of unused foreign tax credits for a year deducted against Part I tax in one year may not be deducted again in a subsequent year.
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