Tax on Foreign Income

The following is my tax situation which I think is worth sharing.

Following a currency conversion using the prescribed BoC US$ exchange rate of 1.0748, my US dividend income is $326 and my withholding tax deducted is $50--damn you IRS.

Since I was a student in 2007, my basic federal tax amount on my T2209 (used to claim foreign tax credit) is only about $171. My combined federal and provincial foreign tax credit wasn't even $5.

So for my foreign dividend income, I ended up paying:
50 + (326 - 45) * 0.15 - 5 = 87.37!!!!

That is a whooping 26%+ tax rate! DOUBLE-YOU-TEE-EFF!!!! By the way, the 45 is a foreign tax deduction allowed by section 20(12), which can be applied because my foreign tax credit isn't large enough to recover all of my foreign tax paid. See: IT506

The moral of the story is that for a young investor with a very low income and lots of tuition tax credits, withholding tax BITES. You will likely not have enough foreign tax credit to recover the 15% withholding tax and end up getting double taxed. Think this scenario over before investing in foreign markets.