Tax Credit - Credit For Payments

Credit For Payments

Many systems refer to taxes paid indirectly, such as taxes withheld by payers of income, as credits rather than prepayments. In such cases, the tax credit is invariably refundable. The most common forms of such amounts are payroll withholding of income tax or PAYE, withholding of tax at source on payments to nonresidents, and input credits for value added tax.

Some systems treat payments of certain taxes as refundable payments of other taxes in specific cases. An example is the U.S. credit for Federal highway use tax paid with respect to gasoline or diesel fuel for vehicle use off highways, which may be claimed as a payment of on federal income tax returns.