Explanation of Proposed Income Tax Treaty Between the United States And the Republic of Finland : Scheduled for a Hearing Before the Committee On Foreign Relations, United States Senate, On June 14, 1990 Jcs-15-90
Explanation of Proposed Income Tax Treaty Between the United States And the Republic of Finland : Scheduled for a Hearing Before the Committee On Foreign Relations, United States Senate, On June 14, 1990 Jcs-15-90
United States. Congress. Joint Committee On Taxation
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persons on their worldwide income, double taxation of income can arise because income earned abroad by a U.S. person may be taxed by the country in which the income is earned and also by the United States. The United States seeks to mitigate this double taxation by generally allowing U.S. persons to credit their foreign income taxes against the U.S. tax imposed on their foreign source income. A fundamental premise of the foreign tax credit is that it may not offset the U.S. tax on U.S. source i...ncome. Therefore, the foreign tax credit provisions contain a limitation that ensures that the foreign tax credit offsets only the U.S. tax on foreign source income. The foreign tax credit limitation generally is computed on a worldwide consolidated (overall) basis. Pursuant to rules enacted as part of the Tax Reform Act of 1986 (the "1986 Act"), the overall limitation is computed separately for certain classifications of income (e.g., passive income, high with- holding tax interest, financial services income, shipping income, dividends from noncontrolled section 902 corporations, DISC divi- dends, FSC dividends, and taxable income of a FSC attributable to foreign trade income) in order to prevent the averaging of foreign taxes on certain types of traditionally high-taxed foreign source income against the U.S.
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