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A foreign tax credit (FTC) is generally offered by income tax systems that tax residents on worldwide income, to mitigate the potential for double taxation. The credit may also be granted in those systems taxing residents on income that may have been taxed in another jurisdiction. The credit generally applies only to taxes of a nature similar to the tax being reduced by the credit (taxes based on income) and is often limited to the amount of tax attributable to foreign source income. The limitation may be computed by country, class of income, overall, and/or another manner.
Most income tax systems therefore contain rules defining source of income (domestic, foreign, or by country) and timing of recognition of income, deductions, and taxes, as well as rules for associating deductions with income. For systems that separately tax business entities and their members, a deemed paid credit may be offered to entities receiving income (such as dividends) from other entities, with respect to taxes paid by the payor entities with respect to the income underlying the income recognized by the member. Systems with controlled foreign corporation rules may provide deemed paid credits with respect to deemed income inclusions under such rules. Some variations on the credit provide for a credit for hypothetical tax to encourage foreign investment (sometimes known as tax sparing).
Detailed rules vary among taxation systems. Examples below are given for illustration purposes only and may not reflect the rules in a particular tax system.
and 29 Related for: Foreign tax credit information
A foreigntaxcredit (FTC) is generally offered by income tax systems that tax residents on worldwide income, to mitigate the potential for double taxation...
A taxcredit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state...
are taxed on dividends distributed by the corporation. Corporations may be subject to foreign income taxes, and may be granted a foreigntaxcredit for...
of incentive stock options, foreigntaxcredits, and home equity loan interest deductions. This broadens the base of taxable items. Many deductions, such...
The Foreign Account Tax Compliance Act (FATCA) is a 2010 U.S. federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their...
A child taxcredit (CTC) is a taxcredit for parents with dependent children given by various countries. The credit is often linked to the number of dependent...
tax arising due to foreign source income. The credit is available to all taxpayers. Business credits and the foreigntaxcredit may be offset taxes in...
and residents are taxed on worldwide income and allowed a credit for foreigntaxes. Income subject to tax is determined under tax accounting rules, not...
An adoption taxcredit is a taxcredit offered to adoptive parents to encourage adoption in the United States. Section 36C of the United States Internal...
taxed, reductions of tax or foreigncredits are provided for taxes paid to other jurisdictions. Limits are almost universally imposed on such credits...
individual shareholders; and the foreigntaxcredit recognizes tax paid to a foreign government on income earned in a foreign country. Provinces and territories...
greatly. Taxes withheld may be eligible for a foreigntaxcredit in the payee's home country. Most withholding tax systems require withheld taxes to be remitted...
purposes of the foreigntaxcredit, an additional exception requires look-through of certain income received from a controlled foreign corporation. Under...
from a U.S. tax return. Therefore, to properly calculate your foreigntaxcredit, you must reduce your foreigntaxes paid by the amount of taxes allocable...
foreign-source income but give a credit for taxes paid on the income in the foreign jurisdiction. Jurisdictions may enter into tax treaties with other countries...
The premium taxcredit (PTC) is a mechanism established by the Affordable Care Act (ACA) through which the United States federal government partially subsidizes...
The Golden Gimmick refers to a foreigntaxcredit deal enacted in November 1950 by the U.S. Government under President Harry Truman between King Ibn Saud...
providing additional depreciation schedules, and created a 4 percent dividend taxcredit for individuals. The Internal Revenue Code of 1954 was enacted in the...
For purposes of income tax in the United States, U.S. persons owning shares of a passive foreign investment company (PFIC) may choose between (i) current...
due. In 2012, Hewlett-Packard lost a lawsuit with the IRS over a "foreigntaxcredit generator" which was engineered by a division of AIG. Al Jazeera also...
havens, U.S. multinationals avoided building up foreigntaxcredits that would reduce their U.S. tax liability. Hines returned to this finding several...
Controlled foreign corporation (CFC) rules are features of an income tax system designed to limit artificial deferral of tax by using offshore low taxed entities...
report additional taxes owed, such as alternative minimum tax, advance premium taxcredit repayment, self-employment taxes, and taxes on IRAs. Schedule...
until 2010 and the first six months of 2011, the FUTA imposed a 6.2% tax (before credits) on the first $7,000 of gross earnings of each worker per year. Once...
subject to foreigntaxcredit where applicable dual taxation agreements are in force. Non-resident entertainers and sportspersons are taxed at 15% on the...
Canada through the foreigntaxcredit, which allows taxpayers to deduct from their Canadian income tax otherwise payable from the income tax paid in other...
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