Last updated 2026-06-27
A foreign tax credit is a credit claimed on your domestic tax return for taxes paid to a foreign government. Instead of filing a refund in the source country, investors can offset the foreign withholding tax against their home-country tax liability. Most countries permit this for taxes paid under applicable tax treaties.
Foreign tax credits and WHT refunds are two separate remedies for the same problem of double taxation. A credit on your annual tax return is typically simpler — no foreign-language forms required — but it only works if you have sufficient domestic tax liability. The credit cannot exceed the domestic tax owed on the same income. If the withholding rate (e.g. 30%) exceeds your marginal rate (e.g. 20%), the excess 10% can only be recovered via a direct refund from the source country.
The same foreign withholding can lead to different filing routes. Pick one route for the tax you paid and follow its evidence and deadline requirements.
| Route | Where relief happens | When you use it |
|---|---|---|
| Source-country refund | The source tax authority refunds the excess above the treaty rate. | After withholding, where the source process accepts a claim. |
| Residence-country credit | Your domestic tax return offsets eligible foreign tax against domestic tax on the same income. | When domestic tax is due and the foreign tax meets local credit rules. |
| Relief at source | The payer or broker applies the treaty rate before paying the dividend. | Before payment, where the payer accepts residence evidence and the applicable declaration. |
The source refund route targets the gap. A residence-country credit may cover foreign tax paid within domestic limits. Do not record both remedies for the same tax.
The source refund route targets the gap. A residence-country credit may cover foreign tax paid within domestic limits. Do not record both remedies for the same tax.
Use the Tax Reclaim calculator to compare the foreign withholding amount with the source-country guide and residence-country credit route for your situation.
Open the calculator