CODE OF VIRGINIA

CREDIT FOR TAXES PAID TO A FOREIGN COUNTRY ON RETIREMENT INCOME (§ 58.1-332.1)

A. Whenever a Virginia resident has become liable to a foreign country for
income tax paid on any pension or retirement income to the extent that such
income is included in federal adjusted gross income for the taxable year,
derived from foreign sources as a result of past employment in a foreign country
and subject to taxation under this chapter, the amount of such tax payable by
him shall, upon proof of such payment, be credited on the taxpayer’s
return with the income tax so paid to the foreign country. The credit allowable
under this section shall not exceed: (i) such proportion of the income tax
otherwise payable by him under this chapter as his income upon which the tax
imposed by the foreign country was computed bears to his Virginia taxable income
upon which the tax imposed by this Commonwealth was computed or (ii) the income
tax otherwise payable under this chapter, in the event that the income upon
which the tax imposed by the foreign country is computed is less than the
Virginia taxable income upon which the tax imposed by this Commonwealth is
computed.

B. For purposes of determining this credit, the foreign currency must be
translated into United States dollars using the prevailing rate of exchange
which most nearly reflects the value of the foreign currency at the time the
taxes were actually paid to the foreign country.

C. As used in this section, a foreign country shall include all possessions of
the United States. Any foreign country which does not qualify for the federal
foreign tax credit under § 901(j) of the Internal Revenue Code will also be
disqualified for the credit allowed under this section.

HISTORY: 1998, c. 292.