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Please help with a, b, c, and d. Thank you Pacific Jewel Airlines (Hong Kong). Pacific Jewel Airlines is a U.S.-based air freight firm with
Please help with a, b, c, and d. Thank you
Pacific Jewel Airlines (Hong Kong). Pacific Jewel Airlines is a U.S.-based air freight firm with a wholly owned subsidiary in Hong Kong. The subsidiary, Jewel Hong Kong, has just completed a long-term planning report for the parent company in San Francisco, in which it has estimated the following expected earnings and payout rates for the years 2011-2014. The current Hong Kong corporate tax rate on this category of income is 16%. Hong Kong imposes no withholding taxes on dividends remitted to U.S. investors (per the Hong Kong United States bilateral tax treaty). The U.S. corporate income tax rate is 36%. The parent company wants to repatriate 70% of net income as dividends annually a. Calculate the net income available for distribution by the Hong Kong subsidiary for the years 2011-2014. b. What is the expected amount of the dividend to be remitted to the U.S.parent each year? c. After estimating the theoretical U.S. tax liability on the expected dividend (what is often termed gross-up in the U.S.), what is the total dividend after tax, including all Hong Kong and U.S. taxes, expected each year? d. What is the effective tax rate on this foreign-sourced income per year? 2011 2012 2013 2014 $ Jewel Hong Kong Income Items (millions US$) Earnings before interest and taxes (EBIT) Less interest expenses Earnings before taxes (EBT) 10,000 $ (1,000) 9,000 $ 12,000 $ (1,200) 10,800 $ 14,000 $ (1,400) 12,600 $ 16,000 (1,600) 14,400 $Step by Step Solution
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