My net income is zero last year but I paid foreign tax due to capital gain. Foreign tax credit was not applied due to zero net income. Can I claim the credit next year?

My company based in the States bought back the shares which resulted in capital gains. I got automatically taxed 15% to the States which I normally can apply it to my Canadian tax as foreign tax credits. However, due to zero net income last year, the credit didn't apply. I wish to apply this credit next year.

119

Level 4

Apr 21, 2022 10:23:42 AM

Yes, you can bring unused foreign taxes from prior years to the current year if you did not claim them yet.

You can claim any unused foreign tax credits for the country for the ten years before, and the three years after this year.

Foreign tax credits are considered unused for a taxation year if you paid more in business income tax for the year in that country than the amount that is deductible as a foreign tax credit for the year for that country.

Below is the process for how to claim prior years' foreign taxes in the current year: -

First of all, click on the "Find" (Magnifying Glass) option on your tax file in TurboTax online.
Type "Foreign Tax", and click on "GO"
Select "YES", and on the next page go to the last line which states, "Unused foreign taxes from prior years" here you can enter the amount of prior years' tax credit.
Click on "Continue" to save all details entered.

For more information on Foreign Tax Credit visit this page of the Canada Revenue Agency: - Federal foreign tax credit

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My net income is zero last year but I paid foreign tax due to capital gain. Foreign tax credit was not applied due to zero net income. Can I claim the credit next year?