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3 Moving Money Across Borders 4.54 points Stopped -oor Reference The interational business with wholly owned subsidiaries faces challonges in moving money across borders and bringing home the profits from those operations. These challenges are magnified when overseas subsidiaries are not wholly owned. The business partners have their own concerns and interests, and the differences must be worked out for the subsidiary to succeed. The international business manager should understand how money is moved across borders and the needs of the business partners and co-owners. Pursuing the objectives of utilizing the firm's cash reserves more officiently and minimizing the firm's global tax liability requires the firm to be able to transfer funds from one locauon to another around the globe. International businesses use a number of techniques to transfer liquid funds across borders. A firm's ability to select a particular policy is severely limited when a foreign subsidiary is part- owned either by a local joint-venture partner or by local stockholders Read each statement Then select the most appropriate category and determine if each item is an advantage for the parent company or a concern for the local fim. Each statement ww have two answers 1. Common method of transfer to parent-Individual subsidiaries policies vary, but this is the most common method by which Subsidiaries transfer funds to parent companies Click to select 2. Banafit could be lost--Tax benefits could be lost if the subsidiary's combined tax rate is higher than the parent's. TICHOKEO Sect 3. Distortion-Con create orificially righ costs for local unit, which may not be recouped by local owners as they do not share the parent company's tax liability Click to see! 4. Not an am's length transaction-Firms can use to circumvent tax regulations by increasing pre-tax costs. lei Select 5. Recognize demands for local owners-Local equity participation must be recognized. Needs of both unit and local owners. Teto SCH 6. Otten tax deductible locally-Payments may be tax deductible locally, which will teduce the subsidiary tax burden, Leto selech Read each statement Then select the most appropriate category and or a concern for the local firm. Each statement will have two answers. ces 1. Common method of transfer to parent-Individual subsidiarles' polic subsidiarles transfer funds to parent companies. Click to select) (Click to select) Divident remittances - advantages for parent/subsidary subsidiary's Divident remittances - local subsiary/owner concern Royalty payments and fees - advantages for parent/subsidary Royalty payments and fees - local subsidiary/owner concern hit, which ma Transfer pricing - advantages for parent/subsidiary Transfer pricing - local subsidiary/owner concern - 4. Not an arm's-length transaction-Firms can use to circumvent tax re (Click to select) 5. Recognize demands for local owners-Local equity participation mu (Click to select) 6. Often tax deductible locally-Payments may be tax-deductible local (Click to select)