Reporting foreign employment, pension, and investment income

Whether you’ve worked overseas, receive a pension from another country, or hold investments outside of Canada, these income sources all need to be reported on your Canadian tax return. While the Canadian tax system provides relief to avoid double taxation, it requires full disclosure of worldwide income if you are a tax resident.

This matters if you’ve spent time working abroad, receive social security or pension income from another country, or hold international stocks, bonds, or bank accounts. Each type of income is taxed differently and may come with different forms, foreign taxes, and CRA reporting obligations.

Let’s walk through how to report foreign employment, pension, and investment income—and how to avoid paying tax twice on the same earnings.

Foreign Employment Income

If you earned wages or salary while working in another country, the CRA treats that income the same as if you earned it in Canada—it’s fully taxable. You must:

• Convert the income into Canadian dollars using the Bank of Canada exchange rate for the date of payment or the average annual rate

• Report the gross amount on your T1 return under employment income

• Include it on line 10400 or 10402, depending on the circumstances

You may have paid income tax to the foreign government. If so, you can usually claim a foreign tax credit on Form T2209 to reduce or eliminate Canadian tax on the same amount.

Foreign Pension Income

Foreign pension income—including government benefits, employer pensions, or private annuities—is generally taxable in Canada, but may be eligible for partial exemptions under a tax treaty.

Common sources include:

• U.S. Social Security benefits (partially exempt under the Canada–U.S. tax treaty)

• U.K. State Pension

• Foreign employer pensions

• Private annuities or retirement accounts (e.g., 401(k), IRA, superannuation)

Some countries withhold tax at source. You must report the gross amount before foreign tax and then claim a credit.

If the country of origin has a tax treaty with Canada, that treaty may:

• Allow a portion of the pension to be excluded from Canadian income

• Reduce foreign tax withholding on the pension

• Specify how and where the income should be taxed

Foreign Investment Income

Interest, dividends, and capital gains from investments outside Canada are all taxable to Canadian residents. This includes:

• Dividends from foreign companies

• Interest earned on foreign bank accounts or bonds

• Gains from the sale of foreign stocks or property

You must:

1. Report the gross amount in Canadian dollars, using the appropriate exchange rate

2. Disclose the country of origin if claiming a foreign tax credit

3. Report capital gains based on the adjusted cost base and sale price, both converted to Canadian dollars

4. Use Form T1135 if the total cost of your foreign property exceeds $100,000 CAD at any point during the year

Foreign tax may be withheld on investment income, and this too may be credited on your Canadian return using Form T2209.

How CRA Treats Foreign Income Types