$3$

$2.$ The Docket Company of Asheville, NC$,$ USA, is considering establishing an affiliate operation in the city of Wellington, on the south island of New Zealand. It is undecided whether to establish the affiliate as a branch operation or a wholly owned subsidiary. New Zealand taxes the income of both resident corporations and branch operations at a flat rate of $28$ percent. New Zealand withholds taxes at $5$ percent on dividends for an investor who holds at least $10$ percent of the shares in the subsidiary company that pays the dividend; $0$ percent if the investor holds $80$ percent or more of the shares in the subsidiary company and meets other criteria; $15$ percent in all other cases. New Zealand does not withhold taxes on the repatriation of branch profits. The United States has an income tax rate of $21$ percent, but for certain types of income a foreign tax credit is allowed for taxes paid to another country. Based on this information, is a branch or subsidiary the recommended form for the affiliate?