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A us corporation is subject to an income tax rate of 35% and has a branch...

A us corporation is subject to an income tax rate of 35% and has a branch in the UK which paid the national corporate tax rate of 30% on its earnings there. The branch generated taxable income from its operations in UK equivalent to $5,000,000. What is the amount of taxes owed to the us government on the income generated in the UK

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Expert Solution

A branch of us corporation in foreign country is allowed to reduce their tax bill in us subject to income taxes paid in foreign country, so UK tax rate is only 30% and US tax rate is 35%, effectively the branch is liable to balance tax of 5% on income earned in UK of $5,000,000.

Tax liability in US = $5,000,000 x 35% = 1,750,000

Less: Tax credit for tax paid in UK = $5,000,000 x 30% = 1,500,000

Tax owed in US = 250,000

ekkarill92 answered 2 years ago
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