A Korean-based company is paying royalties to my company base in the US. The US-Korea Tax Treaty has set the Korean income tax rate at 15% for these. In addition, I pay a 10% local income Korean tax on that (so 16.5% total). According to the treaty there is a "relief from double-taxation". I am unsure however if this means I only do not pay US income taxes on 16.5% of the value or I do not pay taxes on the entire value already taxed.
Example (note currencies are all the same for clarity, doesn't matter if they are USD or KRW)
They pay me $100 in royalties. I pay the Korean income tax of $16.50. Do I pay US income (+FICA/Medicare) on the remaining $83.50 or do I pay no US income taxes on this?
US-Korea Tax Treaty: http://www.irs.gov/Businesses/International-Businesses/Korea---Tax-Treaty-Documents