Abstract: The selection of credit limit methods is a very important issue in international taxation but there exist some theoretical errors in the present literatures. Applying modeling, simulation and rigorous mathematical derivation the tax effects of the comprehensive limit credit method and the line-state limit credit method were compared. It was discovered that whether the comprehensive limit credit method is superior, equal or inferior to the line-state limit credit method depends on the combination of the types of its overseas branches. The results are much complicated than the general conclusion of the present literatures and indicated that the line-state limit credit method does not ensure the fiscal revenue. It was suggested that Chinese tax credit system should change from the line-state limit credit method to the comprehensive limit credit method.