Page 14 - Strategic Tax Planning for Global Commerce & Investment

Cross Border Tax Planning Strategies

Generally, there are two methods of double tax relief:

 Exemption method – Under this method the
country of residence of the taxpayer ex-
empts the income derived from foreign
sources either under the so-called “tax ex-
emption” or “income exemption” methods.

 Under the “tax exemption” method, the
country of residence first computes
the worldwide income of the enter-
prise and then gives an exemption
equal to the domestic tax correspond-
ing to the foreign income.

 Under the “income exemption” meth-
od, the foreign income is not taken into
account at all by the residence coun-
try for its tax purposes.
 Foreign tax credit method – A foreign tax
credit may generally be applied in two
ways:

 The country of residence allows the
taxpayer to credit the tax paid on for-
eign income against the domestic tax
due on its worldwide income (full cred-
it) or,

 The country of residence allows the
taxpayer to credit against the domestic
tax due on the worldwide income the

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