Foreign tax credit

Foreign tax credit — the mechanism that prevents double taxation when you declare foreign income: the tax already withheld abroad (e.g., the US’s 25% treaty withholding on your dividends) offsets your PH liability on that same income, capped at the PH tax attributable to it. If your marginal PH rate is at or below the foreign withholding rate, the credit typically zeroes the PH bill — the declaration costs paperwork, not money. Distinct from PERA’s contribution tax credit: this one offsets tax on cross-border income; that one rewards deposits.

First used in: 2.7 · The tax layer