Tax Credit Example

Tax Credit Example

Tax credit is allowed up to the amount paid in foreign country. Tax credit concept has been introduced to avoid double taxation.

Income = 100

Tax rate in foreign country = 30%

Tax in Pakistan on remittances = 50%

Solution

Tax paid in USA

Income                 100

Less Tax                 30

Remittance             70

Tax payable Pakistan

50% of remittance =        35

Tax credit               =      30

Tax payable in uk    =       5

Total Tax Liability

Total tax liability = 30 +5 = 35