Foreign Tax Credit at the Virginia state level is specific to pension benefits obtained for foreign employment where a foreign country tax was paid on the pension.
Virginia Law: § 58.1-332.1. Credit for taxes paid to a foreign country on retirement income.
There is no foreign tax credit for taxes paid on other transactions such as investments.
Virginia residents may claim a credit for income taxes paid to a foreign country on pension or retirement income derived from employment in a foreign country. The retirement income must be included in Virginia taxable income on the return to which this credit is applied. The credit is nonrefundable and excess credits cannot be carried forward.
To compute the credit, the foreign currency must be converted into U.S. dollars using the prevailing exchange rate that most nearly reflects the value of the currency at the time the taxes were actually paid to the foreign country.
For purposes of this credit, a foreign country shall include all possessions of the United States. Any foreign country that does not qualify for the federal foreign tax credit (IRC 901[j]) does not qualify for this Virginia credit.
Complete Schedule CR, Section 1, Part 10 to claim this credit. Attach a copy of the return filed in the foreign country or other proof of tax payment to the foreign country and a schedule showing computation of foreign currency converted to U.S. dollars.
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