On The Foreign Tax Credit Regime Of U.S. Federal Income Tax Law

Among the legal methods of avoiding international double taxation,foreign tax credit (FTC) has more advantages than the methods of exemption and deduction. For example,from the view of the state that credits foreign taxes,FTC maintains its fiscal jurisdiction as well as avoids international double taxation. Accordingly,FTC has become the favorite method of nations. Since the FTC regime of the United States federal income tax law is the most perfect one in the world,it becomes the research object of this dissertation,through which the author wishes to catch the pith of the U.S. regime and to use it for reference for improving the FTC system of PRC income tax law. The dissertation is consisted of five chapters,besides an introduction and a conclusion.The first chapter is devoted to an analysis of situations of international double taxation when the United States exerts its fiscal jurisdiction and U.S. ways and methods to avoid international double taxation. It is pointed out that whether U.S. exerts its fiscal jurisdiction based on the territorial or the personal principle,international double taxation is possible to be created because of the overlapping of U.S. and foreign fiscal jurisdiction;that U. S. avoids international double taxation by signing bilaterally tax treaties and proscribing unilaterally internal tax rules;that in the internal tax law U.S. adopts the methods of FTC,exemption and deduction,among which the FTC method is the most important.The second chapter is devoted to an theoretical analysis of U.S. FTC regime as an unity of opposition of avoiding international double taxation and maintaining U.S. fiscal jurisdiction. The chapter considers that there are two classes of rules in U.S. FTC regime,rules granting rights and rules restricting rights,of which the former is intended to avoid international double taxation and the latter is to maintain U.S. fiscal jurisdiction. This internal structure of FTC regime is in accordance with the U.S. international tax policies,particularly tax efficiency and tax fairness as understood by the United Sates. The ideal state of the FTC regime is to unify the two factors of avoiding international double taxation and maintaining U.S. fiscaljurisdiction. However,by various reasons in reality the unification is impossible to be perfect and there are always conflicts between the two factors.The third chapter discusses qualifications of FTC in U.S. internal law. The author considers that the qualifications involve three facets,the qualifications of taxpayers,of foreign taxes and of procedures,of which the second facet is prescribed by law in the most detailed way and the kernel of the provisions is that creditable foreign taxes are income taxes in U.S. sense judged on their dominant characters. The law provides these qualifications for FTC for the aim of maintaining U.S. fiscal jurisdiction,namely that FTC is just to be used to avoid international double taxation. However,this aim can not always be achieved. The chapter also discusses particularly qualifications of indirect FTC,relationship of indirect FTC and avoiding international double taxation in U.S. federal tax law.The fourth chapter discusses limitations on FTC in U.S. internal law. The author considers that the basket-limitation system is the core of the current U.S. FTC limitation system and the main function of the basket-limitation system is to prevent taxpayers to cross-credit foreign taxes and to maintain U.S. tax jurisdiction over foreign source income as greatly as possible while maintaining U.S. taxation of U.S. source income. The income source rules,the deduction allocation rules and the rules dealing with net losses in U.S. FTC limitation system have the same function of preventing taxpayers from abusing FTC. However,the current limitation rules can not always reach the ideal state of FTC.The fifth chapter is devoted to an analysis of improving the FTC regime in China's income tax law. The chapter discusses the FTC rules provided by current Chinese laws,compares these rules with those...