Antony company, located in the France has a wholly owned foreign subsidiary in Spain.

The subsidiary paid cash dividend to Antony company of $500,500 and $65,000 in year 1 and year 2 respectively.

Spain had a 15% withholding tax rate on dividend paid to foreign investors in year 1 and year 2.

The Francs income tax rate is 30% and 40% in year 1 and year 2 respectively. Frances withholding tax rate on dividends paid to foreign inventory was 12% in both years.

Assume that in France Excess foreign Tax credit where possible.

Spains income tax rates for two years are listed below:

SPAIN YEAR 1 YEAR 2

Income tax rate 25% 20%

Required:

For each year for Antony Company compute the following. ( Round to 0 decimals ).

1. Grossed up dividend;
2. Foreign taxes deemed paid (all);
3. Frances income tax before FTC;
4. Foreign tax credit (FTC) allowed;
5. Frances tax liability before FTC;
6. Excess FTC;
7. Net Frances Tax liability after excess FTC.

Answer the following question;

8. What is FTC? What is the difference between direct FTC and indirect FTC ? Explain.