The foreign tax credit is what prevents a double tax on a U.S. person’s foreign income. It does this by reducing the U.S. tax by the amount of income tax that is paid to the foreign government. The main provisions may be found in IRC § 901-908.
By permitting the U.S. taxpayer to take a credit, the U.S. government, effectively, is choosing to respect a foreign country’s tax system.
The main purpose and effect of the foreign tax credit was last modified: March 17th, 2016 by Tax