Understand foreign tax credits (T2209 and TP-772-V)

If you’re a Canadian resident earning income from outside Canada, chances are that you’ve had foreign tax withheld. Whether it’s from U.S. dividends, a European pension, or rental income in another country, you’re likely paying tax in both jurisdictions.

To prevent this, Canada allows you to claim a foreign tax credit, which reduces your Canadian tax liability by the amount of foreign tax you’ve already paid on the same income. For most taxpayers, this means completing Form T2209at the federal level, and Form TP-772-V if you file a Quebec return.

This matters because without these forms, you could be taxed twice—once by the foreign government, and again by the CRA or Revenu Québec. Here’s how the system works, when to apply the credit, and how to file it properly.

What Is a Foreign Tax Credit?

A foreign tax credit is a way to offset Canadian income tax with the amount of tax already paid to another country on the same income. It is available when:

You are a Canadian tax resident
You have included the foreign income in your Canadian tax return
You paid or had foreign income tax withheld in the country where the income originated

The credit does not refund the foreign tax—you are simply reducing your Canadian tax bill so you’re not taxed twice on the same money.

Important: You cannot claim a credit if the income is not taxable in Canada or if the foreign tax was not actually paid. The CRA will require proof, especially for large claims.

What Is Form T2209?

Form T2209 (Federal Foreign Tax Credits) is used to calculate your credit at the federal level. It applies to all types of foreign-source income, such as:

Employment income
Investment income (interest, dividends)
Capital gains
Pensions or annuities
Rental income from foreign property

To complete Form T2209, you’ll need:

The type and amount of foreign income
The amount of foreign tax paid
Documentation such as foreign tax slips or account statements
Conversion to Canadian dollars using CRA-approved exchange rates

The form calculates the credit by applying the lesser of:

The foreign tax paid, or
The amount of Canadian tax that would apply to the same income

In other words, you can’t claim more than the Canadian tax otherwise owed.

What Is Form TP-772-V?

If you live in Quebec, you must also complete Form TP-772-V (Foreign Tax Credit) when filing your provincial return. This form serves the same purpose as T2209 but applies to Quebec income tax rather than federal tax.

For TP-772-V, you must:

Report the same foreign income amounts as on your federal return
Provide the foreign tax paid, in Canadian dollars
Use the prescribed exchange rate or the Bank of Canada rate
Attach the form and supporting documents to your Quebec return

Quebec has a similar rule: the credit cannot exceed the Quebec tax you would otherwise pay on the same foreign income.

Tip: Use a worksheet or tracker to record each income source, the country it came from, the tax paid, and how you converted the amounts. This will simplify both T2209 and TP-772-V calculations and documentation.

What Kind of Foreign Taxes Qualify?

Only non-refundable income taxes paid to a foreign country qualify for the credit. This excludes sales tax, value-added tax (VAT), penalties, or estate taxes.

You can claim:

Withholding taxes on dividends or interest from foreign investments
Taxes paid on employment income earned abroad
Foreign capital gains tax
Withholding on pension or annuity payments from other countries
Rental income taxes if you own property abroad

If the tax was refundable, or if it relates to income that is exempt in Canada, it does not qualify for the credit.