Foreign Tax Credit

Foreign Tax Credit means:
credit allowed against U.S. inc: me taxes for foreign taxes paid. The credit can be used only to lower U.S. taxes on income earned overseas. A foreign tax credit limitation is computed by multiplying the U.S. tax Kabi r. before the credit by the ratio of foreign taxable income to total taxable income (U.S. and fc reign . Former IRC (check if this IRC provision is current here) §§27, 901-908.

U.S. and other Developed Countries International Tax Meaning

A method of relieving international double taxation. If income received from abroad is subject to tax in the recipient's country, any foreign tax on that income may be credited against the domestic tax on that income. The theory is that this means foreign and domestic earnings of an entity will as far as possible be similarly taxed, although usually the credit allowed is limited to the amount of domestic tax, with no carry over if tax is higher abroad.

Description and Definition of Foreign Tax Credit

A credit for income taxes paid to a foreign country or U.S. possession. For instance, if you own foreign stock you may have foreign tax withheld from dividends you receive. In most cases you can take a dollar-for-dollar credit for the foreign taxes paid.

Resources

See Also

Further Reading

• Foreign Tax Credit in the West's Tax Law Dictionary
• Foreign Tax Credit in “A Dictionary of Taxation”