Which of the following foreign taxes is not a creditable foreign tax for U.S. tax purposes?
A)Income tax paid to the government of Portugal
B)Income tax paid to the city of Amsterdam
C)Value-added tax paid to the government of France
D)All of these taxes are creditable

Question

Quizplus · Accepted Answer

The U.S. allows for a foreign tax credit to avoid double taxation on income that is taxed both in the U.S. and abroad. However, this credit generally applies to income taxes paid to foreign countries or their political subdivisions. Value-added taxes (VAT), like those paid to the government of France, are not considered income taxes and therefore are not creditable under U.S. tax law.

Which of the Following Foreign Taxes Is Not a Creditable