Question
In: Finance
Golden Eagle Mining, a U.S.-based MNC has a foreign subsidiary that earns $1003000 before local taxes,...
Golden Eagle Mining, a U.S.-based MNC has a foreign subsidiary that earns $1003000 before local taxes, with all the after tax funds to be available to the parent in the form of dividends. The foreign income tax rate is 24 percent, the foreign dividend withholding tax rate is 10 percent, and the firm's U.S. tax rate is 29 percent. What are the funds available to the parent MNC if foreign taxes can be applied as a credit against the MNC's U.S. tax liability?
Solutions
Expert Solution
| Income from foreing Subsidiary | 1,003,000 | |
| Local tax rate @ 24% | (240,720) | |
| After tax funds | 762,280 | |
| Dividend tax | 10.00% | |
| Funds remitted to US | 762280/(1+10%) | |
| Funds remitted to US | 692,982 | |
| Dividend tax | 69,298 | |
| Income included in US | 762,280 | |
| Tax @ 29% | 221,061 | |
| Tax credit | (69,298) | |
| Balance tax payable | 151,763 | |
| So Funds available now= | 610,517 | |
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