Question 1 .

Lisma company is a respectful consulting company that provides advice to customers primarily on matters related to international taxation. Lisma company is located in country AAA, where the income tax rate is 45%. Lisma company has two branches that are located in countries BBB and CCC each branch provides consulting services on accounting and taxation to clients in their countries.

The amount of income before income taxes and income tax rate for both branches are as follows:

Country country

BBB AAA

Income before taxes 1,500,000 1,600,000

Income tax rate 25% 35%

Required:

Compute the following:

1. Lisma companys foreign source income.
2. Actual amount of taxes paid by lismas branches in foreign countries.
3. Lismas home income tax on foreign source income.
4. Foreign tax credit allowed.
5. Lismas home country tax liability and excess foreign tax credit.
6. What is a problem of double taxation? Explain.