Add a foreign tax credit

Overview

Foreign tax credits are recorded in your tax return by entering them on a Foreign Income workpaper. TaxLab will perform a full limitation calculation, on a segment by segment basis, to determine whether there are any restrictions on the foreign tax credit allowed, and then will display the allowable amount in the tax return.

Foreign tax credit limitation calculation

Tax credits that have been entered into a Foreign interest, Foreign dividend or Attributed FIF/CFC income workpaper are automatically added to the foreign tax credits limitation workpaper. 

To access, click the Workpapers tab > Credits > Foreign Tax Credits.

The workpaper will populate the tax credits you have entered, or you can select Manual override. 

Manual override

Selecting manual override will immediately hide any foreign tax credits that have been added from foreign income workpapers, and will allow you to enter your own instead. 

1. Click the New button.
2. Type the name of the segment.
3. Enter the amount of foreign income tax paid and the foreign tax credit allowed.
4. Optional: Add a note explaining why you made this transaction.
5. Click Save.
6. Click Export to export any of your entered data to Microsoft Excel in an .xls format.

Foreign Tax Credit reporting

Any foreign tax credits that you have entered manually, or have come through the automated Foreign tax credit limitation calculation, will display in the Statement of Tax Position. You can access this by selecting Tax Position from the navigation bar.

Foreign tax credits and consolidated tax groups

If the entity is a member of a consolidated tax group, you can use either the full limitation calculation or the manual override option. However, the option you choose will require you to enter credits either at the group or the entity level.

• Full limitation calculation: The foreign tax credits can be entered in the member entity. The foreign tax credit limitation calculation will not be displayed on the member entity. However, the full limitation calculation will be displayed in the consolidated tax group.
• Manual override: you will need to manually enter the foreign tax credits to the consolidated tax group. 

What's next?

Learn about recording Tax Losses.

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