In the U.S. tax code, a credit against domestic U.S. income taxes up to the amount of foreign taxes paid on foreign-source income.

If a mutual fund has more than 50% of the value of its assets invested in securities of foreign corporations, the fund may pass the benefit of the foreign tax credit to its shareholders. A mutual fund that distributes a foreign tax credit must notify its shareholders of their share of foreign taxes paid by the fund and the portion of the dividends that represents foreign income.

A credit to eliminate double taxation on foreign income earned by a fund. A fund that has invested in foreign companies and has paid income taxes to foreign governments may pass through the tax benefits resulting from these foreign tax payments to its shareholders in certain circumstances. A fund will report these foreign tax payment amounts to shareholders in box 6 of Form 1099-DIV. This amount may be taken as a foreign tax credit or as a tax deduction by shareholders.