How might a parent company's home country eliminate double taxation on foreign source income?

Question

Quizplus · Accepted Answer

All of the above options - tax credits for taxes paid to foreign countries, tax deductions for taxes paid to foreign countries, and taking a territorial approach to taxing income - can help eliminate double taxation on foreign source income for a parent company's home country. Tax credits reduce the overall tax burden by allowing the parent company to offset the tax liability it owes to its home country with the taxes it has already paid to foreign countries. Tax deductions allow the parent company to reduce its taxable income by the amount of taxes it has paid to foreign countries. Taking a territorial approach to taxing income means that only income earned within a country's borders is taxed, meaning that income earned by a parent company's foreign subsidiaries would not be taxed again by the home country.

How Might a Parent Company's Home Country Eliminate Double Taxation