Tax credit

1.

A reduction in a tax liability, directly reducing the net amount of tax payable.

For example, the tax credit under the 'imputation system' which wholly or partially imputes to the shareholders some of the corporation tax paid by companies on the income out of which dividends are paid.

In some circumstances a net amount of tax repayable, resulting from certain types of tax credit, can be refunded to the taxpayer in cash.

2.

Less commonly, a smaller indirect reduction in a tax liability, by way of a deduction from the net taxable profits.

See also

• Credit
• Credit relief
• Deductions
• Foreign tax credit
• Imputation system
• Tax relief