Foreign tax credit

Subtracting tax paid abroad from tax owed at home

In detail

The tax already taken abroad reduces what you owe at home, which is how double taxation is eased. It is usually claimed on a tax return, though some systems subtract it at withholding instead, and there is normally a ceiling on how much can be subtracted.

Example

With $10 withheld abroad, up to $10 can come off the tax owed at home.

Differences by country

Japan — In Japan the credit is claimed on a tax return; without filing, nothing comes back.

South Korea — In Korea the foreign tax credit is claimed on the return in years when the foreign income is added to total income. For dividends taxed separately, the foreign tax is instead subtracted when tax is withheld (as of 2026).

Related terms

Double taxation Tax return Foreign stocks

Read in the app (App Store)

For learning, not investment advice. Decisions are your own.