How do I submit foreign income, if I own business in Slovakia, that is taxed in Slovakia as well?

There is Canadian-Slovak tax treaty. Am I a permanent resident of Canada. What do I need to have prepared to claim the income is correct and taxed?


The first thing you need to do is determine your residency. Where do you spend most of your time, in Canada or Slovakia? Do you have a home in Canada? Any spouse or dependants? Where do they live? Etc. Depending on your circumstances, you may need to use the treaty tie breaker rules to determine your residency. 

If you are in fact a Canadian resident, you are taxed on your worldwide income; so you would have to include the Slovakia business income on the T2125 business activity form. Keep in mind that provinces can tax individual income, but not business income earned through a Permanent Establishment located outside the province. Where the business is located outside Canada, a 48% federal surtax applies in lieu of provincial tax. 

You an claim a foreign tax credit for the tax paid in Slovakia. However, it's a bit tricky to do on the software. First you will need to manually enter the foreign tax on the Foreign Tax Credit screen. Then you will need to use the Multiple Jurisdiction Form T2203 in order to claim a foreign tax credit on the 48% surtax. 

You would also be required to pay 9.9% Canada Pension Plan premiums on this income (4.95% employee and 4.95% employer share). 

Hope this helps. 

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