Foreign Tax Credit

Eliminating Double Taxation on Foreign Earnings

If you’re doing business globally, you may be getting double-taxed.

The U.S. government wants to tax income no matter where it’s earned. Foreign governments likely want to tax you on any dollar you earned inside their borders. Isn’t there a way to avoid this double taxation? Perhaps.

You essentially may have two options when filing your US taxes. You can take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as a deduction. The Foreign Tax Credit (FTC) can offset foreign taxes paid abroad dollar-for-dollar. The deduction reduces your taxable income, but the leftover dollars are still taxed at your marginal tax rate.

While it may seem like a simple choice, it’s actually extremely complicated.

To fully take advantage of the FTC, you have to plan carefully. The way your business is structured can impact results, so the best time to start planning is before you start doing business internationally (learn more about entity structuring for foreign operations).

But, no matter how you’ve structured your organization, we can help you decide if the FTC is right for you – and how to make the most of it. We can also support your organization in multiple foreign tax situations:

  • FTC optimization
  • Maximizing foreign source income
  • 863(b) sales and timing of distributions
  • Fair market value and alternative tax book value calculations for interest expense apportionment
  • Expense apportionment
  • Headquarters expense allocation
  • Foreign source income maximization
  • Foreign title passage planning
  • Overall Foreign Loss and Overall Domestic Loss studies
  • Foreign Earnings and Profits and tax pool studies
  • FTC planning in flow-through situations

See how we can help you minimize the impact of foreign taxes on your bottom line.