How does tax sparing relief work?

Question

I heard it's something to do with double tax relief and unilateral tax relief ? Any relief ceilings ? More details to come.

Answer 1

Where a developing country would have otherwise given tax incentives to encourage foreign investments into the country, this incentive given to the foreign investor would be frustrated if the investor has to pay tax in the home country on foreign income that has been tax exempt in the developing country.

To ensure that the investor does not loose any tax benefit given by the developing country, the country of residence of the investor will grant a tax sparing relief.

This is a tax credit for the foreign tax deemed to have been paid in the country. The relief is a tax credit otherwise provided in a tax treaty between a developed country and a developing country. DTR etc.

Answer 2

Well, this is not a very common practice but a colleague of mine did benefit from it last year. It can only be triggered after a person submits a petition asking for a tax relief and must have a strong reason such as divorce, disability etc. Ceiling is on a case by case basis.