Following 2016 DC Court of Appeals ruling, IRS agrees that #Americansabroad in France were wrongly denied the right to use certain French taxes as Sec. 901 Foreign Tax Credits to offset U.S. taxes https://t.co/0mz6o81REz pic.twitter.com/2YPNF8xZQE
— U.S. Citizen Abroad (@USCitizenAbroad) June 18, 2019
It its simplest terms the controversy was over whether certain French taxes should be interpreted to be income taxes (in which case they could be used as Foreign Tax Credits) or Social Security taxes (in which case the taxes could not be credited against U.S. income taxes). At a minimum, the case assumes that NOT ALL foreign taxes can be used as tax credits to offset U.S income taxes.
(Beyond that, the DC court of appeal decision provides guidance with respect to (1) Who decides how foreign taxes are to be treated under a tax treaty (hint not ONLY the IRS) and (2) what kind of evidence is relevant in determining the question (hint U.S. dictionaries are not to be used).)
There are many people in the world, who think that all of the foreign taxes paid by Americans abroad can be used as credits against U.S. tax owing.
As part of a “conversation” with the “Powers To Be” in DC, I think it’s important to demonstrate that there are many foreign taxes that are simply not “creditable” against U.S. taxes.
Could you please provide examples from your country of residence? What are specific examples of “taxes” paid in your country of residence that are not eligible to be used as “foreign tax credits” under Section 901 of the Internal Revenue Code.