• The foreign tax must be foreign income tax

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    To count towards a tax offset, foreign income tax must be imposed under a law other than an Australian law and be:

    • a tax on income
    • a tax on profits or gains, whether of an income or capital nature, or
    • any other tax that is subject to an agreement covered by the International Tax Agreements Act 1953 (Agreements Act).

    The foreign income tax includes taxes similar to Australian withholding tax that is imposed in place of a tax on the net amount of income.

    (For examples, refer to Taxes imposed by Australia's major trading partners for which a foreign income tax offset is available.)

    The foreign income tax must be correctly imposed under the relevant foreign law and in accordance with any tax treaty the country has with Australia. For example, if country A is limited under a tax treaty to taxing at a rate of up to 10% interest derived in that country by an Australian resident but country A imposes a domestic tax rate of 25% for interest derived by all foreign residents, only 10% of the tax counts towards the tax offset. The taxpayer would need to seek a refund of the balance (that is, 15%) from country A's tax authority.

    The foreign income tax may be imposed at a supra-national, national, state, provincial, local or municipal level. An example of a supra-national tax is that imposed by the European Union on pensions paid to its former employees.

    Foreign taxes not included

    The following types of foreign tax do not count towards a foreign income tax offset:

    • inheritance taxes
    • annual wealth taxes
    • net worth taxes
    • taxes based on production
    • credit absorption taxes, that is, a tax that is payable only because the taxpayer or another entity is entitled to foreign income tax offset in Australia
    • unitary taxes, that is, a tax on income, profits or gains of a company derived from sources within the country where the tax is imposed that takes into account income, losses, outgoings or assets of the company (or of an associated company) derived, incurred or situated outside that country, except where the tax only takes those factors into account
      • if such an associated company is a resident of the foreign country for the purposes of the law of the foreign country, or
      • for the purposes of granting any form of relief in relation to tax imposed on dividends received by one company from another company.
       

    Penalties, fines and interest do not qualify as foreign income tax.

    If you are unsure about whether a specific foreign tax is a foreign income tax, you can write to us and request a private binding ruling.

    Taxes imposed by Australia's major trading partners for which a foreign income tax offset is available

    A foreign income tax offset may be available for the foreign taxes listed below. This list is not exhaustive nor, except for India, does it include local or state taxes.

    Argentina

    Income tax (Impuesto a las ganancias)

    Canada

    Income taxes imposed by the Government of Canada under the Income Tax Act.

    China

    Income tax

    France

    Income tax and corporation tax, including any related withholding tax, prepayment (precompte) or advance payment

    Germany

    Income tax (einkommensteuer)

    Corporation tax (korperschaftsteuer)

    India

    Income tax, including any surcharge

    Capital gains tax

    Non-resident withholding tax

    State government imposed taxes on various agriculture incomes

    Italy

    Individual income tax (l'imposta sul reddito delle persone fisiche)

    Corporate income tax (l'imposta sul reddito delle societ , formerly l'imposta sul reddito delle persone giuridiche)

    Japan

    Income tax

    Corporation tax

    New Zealand

    Income tax

    Non-resident withholding tax

    Tax on profits from property sales

    Singapore

    Income tax

    South Africa

    Normal tax

    Secondary tax on companies (due to be replaced with a withholding tax on dividends)

    Withholding tax on royalties

    South Korea

    Income tax

    Corporations tax

    Inhabitant tax

    United Kingdom

    Income tax

    Capital gains tax

    Corporations tax

    United States

    Federal income taxes imposed by the Internal Revenue Code

      Last modified: 04 May 2012QC 28013