Some of my business income is from other countries. How do I report this?

Question: Some of my business income is from other countries. How do I report this?

Answer:

Generally, you treat foreign business income the same way you would handle business income from Canadian sources on your income tax return.

For instance, suppose I do some work for an American client, who sends me a cheque in U.S. dollars. It gets converted to Canadian funds when I deposit it into my Canadian business account, and I record it in my business records. When I fill out my T1 form, it's part of my total business income calculations.

However, if you are actually working in a foreign country, such as the United States, (i.e. you receive payroll cheques from an American company), you will have to pay income tax in that country.

If you are working in a foreign country, you should also file a Canadian tax return (although you would not pay Canadian income tax as Canada and the U.S. have a tax treaty and you would be credited with the income tax you had paid in the U.S.).

In other words, you only pay your income tax in one place, but you may need to file two income tax returns.

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