Tax Analysts provides news, analysis, and commentary on tax-related topics, including Foreign Tax Credits. Foreign tax credits are offered to companies for income taxes paid to foreign earnings in a worldwide taxation system. The FTC is meant to mitigate double taxation on foreign source income.

The U.S. FTC established by section 901 of the Internal Revenue Code allows for the crediting of foreign taxes paid by U.S. citizens, residents, and domestic corporations. Section 902 deems the taxes paid by a foreign corporation of which a domestic corporation owns 10 percent or more of the voting stock to have been paid by the domestic corporation in proportion of the distribution to the post-1986 earnings. Section 904 sets out limitations on claims for foreign tax credits.

Section 909 further limits claims for foreign tax credits in the event of a splitting event. Final FTC splitter regulations under section 909 (T.D. 9710; 2015-8 IRB 6030) define when a splitting event has occurred and how FTCs are tracked with related income.(News coverage: "IRS Releases Final FTC Splitter Regs") Regulations issued under section 901 (T.D. 9634; 2013-40 IRB 272) seek to prevent foreign tax credit generator transactions in which a highly structured transaction results FTCs in excess of the amount of foreign tax actually owed.

The FTC is only applies to the technical taxpayer liable to pay an income tax or, under section 903, a tax in lieu of an income tax. Taxpayers may not receive an economic benefit in exchange for the tax payment eligible for the foreign tax credit.

Tax Notes consistently and promptly publishes all relevant foreign tax credit information and rules.