6 July 1990 Ruling EACC7371 F - Foreign Tax Credit and Personal Tax Credits

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

July 6, 1990

Dear:  19(1)

We are writing in reply to your letter dated June 17, 1990, concerning the calculation of Canadian taxes.  The following comments may be of some assistance.

1)     Where you are claiming a foreign tax credit, you will be required to calculate your taxes on Schedule 1 (i.e. Detailed Tax Calculation) instead of page 4 of the return (page 4 refers you to Tables A & B).  Schedule 1 is attached inside the guide.  The taxes withheld by the United States would be recorded on line 507 of the Schedule.  We would like to point out that the foreign tax credit reduces Federal Tax and not Basic Federal Tax (i.e. line 506).  The Federal Individual Surtax and the British Columbia Income Tax are a percentage of Basic Federal Tax (see bottom half of Schedule 1).  Federal tax, Federal Individual Surtax and British Columbia Income Tax as determined on Schedule 1 are then transferred to lines 406, 419 and 423 respectively, on page 4 of the return.

2)     The basic personal credit of $1,031.22 and the credit for spouse of $859.35 (smaller if spouse's income exceeds $505.00) are recorded along with other "Non-Refundable Tax Credits" on line 338 of page 2 of the return.  The total Non-Refundable Tax Credits are then deducted to arrive at Federal Tax on line 402 of page 4 of the return or line 501 on Schedule 1, as the case may be.  The confusion perhaps is that these credits are initially recorded on lines 300 and 303 of page 2 of the return at $6,066.00 and $5,055.00 (see page 3 of the return respectively.  Then on line 338 they are multiplied by 17% to arrive at the deductible tax credit.

We are always looking for ways of simplifying our tax forms and will forward your comments to the appropriate division.

We trust you will find this to your satisfaction.

Yours sincerely,

C. Savage Acting Director Provincial and InternationalRelations Division

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