The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________.
A)transfer pricing
B)a tax credit
C)lag strategies in tax planning
D)passive income reductions

Question

Quizplus · Accepted Answer

This principle is commonly known as a foreign tax credit. It allows firms to offset their tax liability by the amount of income taxes they have paid to foreign governments. This helps to avoid double taxation, as firms are not taxed on the same income by both their home country and the foreign country where they do business.

The Principle by Which the Tax Authorities Allow Firms to Reduce