On the T2209 Federal Foreign tax Credit worksheet, it indicates "Any amount of tax you paid to a foreign government in excess of the amount you had to pay according to a tax treaty is considered a voluntary contribution and does not qualify as foreign taxes paid.” This means that the excess amounts are not eligible for the s. 20(11) or 20(12) deductions. It will be viewed as a voluntary payment, rather than a true tax.
For example, paragraph 1.35 of CRA Folio S5-F2-C1 states:
“If, for example, a resident of Canada receives income from sources in another country which has been subject to withholding tax at a rate in excess of the rate specified in a treaty between Canada and that country, such excess is not considered to be foreign tax paid for the year for purposes of the foreign tax credit. The maximum credit allowed will be determined on the basis of the treaty rate and the taxpayer should seek a refund of the excess withholding tax from the foreign revenue authorities.”
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