Income Tax Act — I-3.3 126
Foreign tax deduction 126 (1) A taxpayer who was resident in Canada at any time in a taxation year may deduct from the tax for the year otherwise payable under this Part by the taxpayer an amount equal to (a) such part of any non-business-income tax paid by the taxpayer for the year to the government of a country other than Canada (except, where the taxpayer is a corporation, any such tax or part thereof that may reasonably be regarded as having been paid by the taxpayer in respect of income from a share of the capital stock of a foreign affiliate of the taxpayer) as the taxpayer may claim, not exceeding, however, (b) that proportion of the tax for the year otherwise payable under this Part by the taxpayer that (i) the amount, if any, by which the total of the taxpayer’s qualifying incomes exceeds the total of the taxpayer’s qualifying losses (A) for the year, if the taxpayer is resident in Canada throughout the year, and (B) for the part of the year throughout which the taxpayer is resident in Canada, if the taxpayer is non-resident at any time in the year, from sources in that country, on the assumption that (C) no businesses were carried on by the taxpayer in that country, (D) where the taxpayer is a corporation, it had no income from shares of the capital stock of a foreign affiliate of the taxpayer, and (E) where the taxpayer is an individual, (I) no amount was deducted under subsection 91(5) in computing the taxpayer’s income for the year, and (II) if the taxpayer deducted an amount under subsection 122.3(1) from the taxpayer’s tax otherwise payable under this Part for the year, the taxpayer’s income from employment in that country was not from a source in that country to the extent of the lesser of the amounts determined in respect thereof under paragraphs 122.3(1)(c) and 122.3(1)(d) for the year, is of (ii) the total of (A) the amount, if any, by which, (I) if the taxpayer was resident in Canada throughout the year, the taxpayer’s income for the year computed without reference to paragraph 20(1)(ww), and (II) if the taxpayer was non-resident at any time in the year, the amount determined under paragraph 114(a) in respect of the taxpayer for the year exceeds (III) the total of all amounts each of which is an amount deducted under section 110.6, 110.61 or 110.62 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (g) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and (B) the amount, if any, added under section 110.5 in computing the taxpayer’s taxable income for the year. Authorized foreign bank (1.1) In applying subsections 20(12) and (12.1) and this section in respect of an authorized foreign bank, (a) the bank is deemed, for the purposes of subsections (1), (4) to (5), (6) and (7), to be resident in Canada in respect of its Canadian banking business; (b) the references in subsection 20(12) and paragraph (1)(a) to “country other than Canada” shall be read as a reference to “country that is neither Canada nor a country in which the taxpayer is resident at any time in the taxation year”; (c) the reference in subparagraph (1)(b)(i) to “from sources in that country” shall be read as a reference to “in respect of its Canadian banking business from sources in that country”; (d) subparagraph (1)(b)(ii) shall be read as follows: “(ii) the lesser of (A) the taxpayer’s taxable income earned in Canada for the year, and (B) the total of the taxpayer’s income for the year from its Canadian banking business and the amount determined in respect of the taxpayer under subparagraph 115(1)(a)(vii) for the year.”; (e) in computing the non-business-income tax paid by the bank for a taxation year to the government of a country other than Canada, there shall be included only taxes that relate to amounts that are included in computing the bank’s taxable income earned in Canada from its Canadian banking business; and (f) the definition tax-exempt income in subsection (7) shall be read