Taiwan's Ministry of Finance has issued a notice that explains the correct calculation of deductible foreign tax credits. This involved the determination of three values:
- The actual amount of foreign tax paid (A);
- The deductible limit (B), which is calculated as: (Foreign income – related costs) × 20% (corporate tax rate); and
- The (incremental) domestic tax payable due to the addition of foreign income (E), which is calculated as follows:
- domestic tax before foreign income (C) = Domestic i…