Qu'Appelle Enterprises, a Canadian import-export trading firm, is considering its international tax situation. Canadian tax law requires
Question:
Poland Sweden
Earnings before interest and taxes (EBIT).........80 million CAD...100 million CAD
Host country taxes paid...............................16 million CAD.....60 million CAD
Earnings before interest and after taxes............64 million CAD.....40 million CAD
a. What is the Canadian tax liability on the earnings from the Polish subsidiary assuming the Swedish subsidiary did not exist?
b. What is the Canadian tax liability on the earnings from the Swedish subsidiary assuming the Polish subsidiary did not exist?
c. Under Canadian tax law, Qu'Appelle is able to pool the earnings from its operations in Poland and Sweden when computing its Canadian tax liability on foreign earnings. Total EBIT is thus 180 million CAD, and the total host country taxes paid is $76 million CAD. What is the total Canadian tax liability on foreign earnings? Show how this relates to the answers in parts (a) and (b).
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
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