The following instructions are taken from the form.
Information and Instructions
This credit is for foreign income or profits taxes a trust paid on income sourced from a country other than Canada and reported on the trust's Canadian income tax return. Tax treaties with other countries may affect whether the trust is eligible for this credit.
Note
If a deduction was claimed on line 41 of the trust's return for income that is not taxable in Canada under a tax treaty, do not include that income in the trust's "Net foreign non-business income" (line 22092) or in the trust's "Net foreign business income" (line 22094). Also, do not include any foreign tax withheld from the income in the trust's "Non-business income tax paid to a foreign country" (line 22091) or in the trust's "Business income tax paid to a foreign country" (line 22093).
Use this form to calculate the trust's credit for non-business income tax and business income tax paid to a foreign country. If the trust paid either of these types of tax to more than one foreign country, calculate the trust’s credit for each country on a separate sheet, using the formulas and line numbers on this form. After each credit is calculated, add together each line number of the calculations and put the total on the corresponding line number on this form. Keep any separate sheets with the trust’s books and records. If the trust has not paid foreign business income tax,and has paid foreign nonbusiness income tax of $200 or less, no separate calculations are necessary.
In most cases, the foreign tax credit the trust can claim for each foreign country is whichever of the following two amounts is lower:
- the foreign income tax the trust actually paid
- the tax otherwise due in Canada on the trust's net income from that country
Note
If the trust paid tax on income from property sourced outside of Canada (other than real or immovable property), the trust's non-business foreign tax credit for that income cannot be more than 15% of the trust's net income from that property. However, the trust may be able to deduct on line 19 of the trust's return the part of the foreign taxes it paid over 15%.
How to claim:
Do all calculations in Canadian dollars. Income tax payable to a foreign government and income sourced outside Canada in a foreign currency must be converted to Canadian dollars. For information about acceptable methods of converting income tax payable, see Income Tax Folio S5-F2-C1, Foreign Tax Credit.
If the trust was a member of a partnership and may claim part of the foreign tax the partnership paid, include in the trust's calculations the amount shown in the financial statements or in box 171 and box 172 of the T5013 Statement of Partnership Income.
Claim on line 23 of the trust's Schedule 11 the amount from line 12 of this form. That amount should not be more than the amount on line 22 of Schedule 11.
If the trust's federal foreign tax credit on non-business income is less than the tax that the trust paid on non-business income to a foreign country and the trust was not a resident of Quebec on December 31, 2022, it may be able to claim a provincial or territorial foreign tax credit. Complete Form T3 PFT, T3 Provincial or Territorial Foreign Tax Credit for Trusts to calculate the credit and attach the form to the trust's completed T3 return.
If the trust was a resident of Quebec on December 31, 2022, see the guide for the trust's provincial income tax return for Quebec.
On line 19 of the trust's return, the trust may be able to deduct the amount of net foreign tax it paid for which it has not received any foreign tax credit. This does not include certain taxes the trust paid, such as on amounts it could have deducted under a tax treaty on line 41 of its return as income exempted from tax. For details, read Income Tax Folio S5-F2-C1, Foreign Tax Credit.
Supporting documents – Attach proof of the foreign income earned and the related foreign tax the trust paid to a foreign country (or countries) such as:
- letters, statements, or receipts from the payer of the income
- information slips in the name of the trust, such as T5013, T3, and T5