Corporate tax: Double taxation

• 10 individuals founded a company in year 1. Each one has paid 100 .

• In Year 1 the society produces a profit of 30, that shareholders decide to maintain in the society as a retained earnings, so they dont receive any dividend.

• In Year 2 the society produces 50, 30 are retained earnings and the remaining 20 are distributed through shareholders.
• In Year 3 the profit is 80: 40 retained earnings and 40 distributed

(I) Manolo is one of these shareholders. He has obtained every year 300 from other sources. At the beginning of year 4, Manolo sold his shares for 150. Calculate: - The corporate tax (tax rate 25%) paid by the company - The benefit received by Manolo each year (remember to discount the CT paid by the company) - Total income tax (tax schedule from unit 4) pay by Manolo. Can you calculate which amount corresponds to Manolo's dividend? - Calculate double taxation for Manolos shares in every period.

Corporation

Income Tax

Double taxation

Year

Profit

Dividens

Retained earning

Corp Tax

Manolo dividend

Other Income

Capital gain

Manolo's Income

Tax Payable

ATR

MTR

CT

IT (MTR)

1

2

3

4

TOTAL

0.0

0.00

0.00