Foreign Tax Credit Law and Legal Definition

Foreign Tax Credit is 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 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.