Chapter 8 smartbook

Excess foreign tax credits (FTC) may be used to offset additional taxes paid to the U.S on foreign source income in years in which foreign tax rates are lower than the U.S tax rate. How many years can an excess FTC may be carried forward? Multiple choice question. 10 year 20 years 5 years 15 years

10 year

Select the best answer to complete the following statement: "Beginning 2018, a U.S parent company is entitled to a Blank______ dividends received deduction for dividends it receives from any 10-percent-or-greater-owned foreign operation." Multiple choice question. 100 percent 50 percent 10 percent 21 percent

100 percent

The withholding tax rate for portfolio dividends (paid to individuals) recommended by the OECD model is: Multiple choice question. 10 percent 15 percent 0 percent 5 percent

15 percent

Double taxation arises when: Multiple choice question. Two countries levy tax on different incomes Two countries levy tax on the same income A country collects taxes on the same income in two years Countries double their tax rates

Two countries levy tax on the same income

One of the two approaches taken on the issue of foreign source income is: Multiple choice question. Worldwide approach Discretionary approach Single taxation approach Double taxation approach

Worldwide approach

Withholding taxes are imposed on payments made to foreign parent companies or foreign affiliated companies. The types of payments typically subject to withholding tax are all of the following, except: Multiple choice question. cash dividends interest purchase on credit royalties

purchase on credit

Select the best answer to complete the following statement: "Under the Blank______ approach, residents of a country are taxed by the country in which they reside regardless of their citizenship or where the income was earned." Multiple choice question. citizenship residence income average source of income

residence

Select the best answer to complete the following statement: "Almost all countries generally assert the jurisdictional authority to tax income where it is earned, also known as Blank______ regardless of the residence or citizenship of the recipient." Multiple choice question. income tax bracket types of income amounts of income source of income

source of income

Select the best answer to complete the following statement: To relieve the double taxation, the international norm is that Blank______ should take precedence over Blank______ in determining tax jurisdiction. Multiple choice question. citizenship, source residence, source residence, citizenship source, residence

source, residence

Assume CNU Company's foreign branch earns income before income taxes of $200,000. Income taxes paid to the foreign government are computed based on a rate of 10%. Sales and other taxes paid to the foreign government are $10,000. CNU is a U.S company. The US income tax before credit is 21%. What is the U.S taxable income if CNU takes the tax credit? Multiple choice question. $200,000 $190,000 $180,000 $170,000

$200,000

Assume CNU Company's foreign branch earns income before income taxes of $200,000. Income taxes paid to the foreign government are computed based on a rate of 10%. Sales and other taxes paid to the foreign government are $10,000. CNU is a U.S company. The US income tax before credit is 21%. What is the U.S taxable income if CNU takes the tax deduction? Multiple choice question. $170,000 $190,000

$200,000 - (10% x $200,000) - $10,000 = $170,000

The withholding tax rate on dividends in the U.S is 30%. Frucot, an U.S-based company, pays $200 dividend to a stockholder in Vietnam. What is the amount of tax withheld from the dividend payment? Multiple choice question. $140 $30 $60 $70

$60

The Tax Cuts and Jobs Act, passed in 2017, made the most extensive changes to the international tax provisions in U.S tax law since 1986. What are the objectives of the new provisions? 1. To make the U.S corporations more competitive internationally 2. To prevent erosion of the U.S tax base 3. To balance the U.S import-export Multiple choice question. 2 and 3 1, 2 and 3 1 and 2 1 and 3

1 and 2

Excess foreign tax credits (FTC) may be used to offset additional taxes paid to the U.S on foreign source income in years in which foreign tax rates are lower than the U.S tax rate. How many years can an excess FTC may be carried back? Multiple choice question. 1 year 10 years 5 years 2 years

1 year

Double taxation relief can be accomplished by: 1. To exempt some or all foreign source income from taxation by adopting a participation exemption or territorial approach to corporate income taxation 2. To allow the parent company to deduct the taxes paid to the foreign government in calculating its taxable income 3. To provide the parent company with a credit for taxes paid to the foreign government Multiple choice question. 1, 2 and 3 2 and 3 1 and 3 1 and 2

1, 2 and 3

In 2013, the OECD developed an action plan to help nations close the gaps in tax laws that allows MNCs to artificially, but legally, reduce their taxes. The action plan covers issues such as: 1. designing effective controlled foreign corporation rules 2. limiting base erosion via interest deductions, mandatory disclosure of aggressive tax planning by MNCs 3. the design of domestic rules to prevent tax treaty abuse Multiple choice question. 2 and 3 1 and 3 1, 2 and 3 1 and 2

1, 2 and 3

What are the purposes of tax treaties? 1. To facilitate international trade and investment by reducing tax barriers to the international flow of goods and services 2. To reduce the possibility of double taxation through the clarification of tax jurisdiction 3. To reduce taxes through a reduction of withholding tax rates Multiple choice question. 1 and 2 2 and 3 1, 2 and 3 1 and 3

1, 2 and 3

The withholding tax rate for interest income recommended by the OECD model is: Multiple choice question. 5 percent 0 percent 10 percent 15 percent

10 percent

What is the range of the value-added tax in the European Union? Multiple choice question. 30% to 35% 17% to 27% 0% to 5% 5% to 10%

17% to 27%

Which countries are considered tax havens? Multiple choice question. Israel and Malaysia Bahamas and Ireland Spain and Malaysia Bahamas and China

Bahamas and Ireland

In which countries would tax-planning strategy tend to be more applicable (i.e. useful, effective)? ACountries that do not levy any withholding taxes. BCountries with similar withholding rates on different types of payments. CCountries with different withholding rates on different types of payments. DCountries with one single withholding rate for all types of payments

Countries with different withholding rates on different types of payments.

The factors used to determine the appropriate amount of U.S taxable income from foreign operations are all of the following, except: Multiple choice question. Legal form of the foreign operation Current U.S corporate tax rate Percentage level of ownership Effective foreign tax rate Nature of the foreign source income

Current U.S corporate tax rate

Which country in 2017 had the highest effective corporate income tax rate? Multiple choice question. The U.S Canada Spain Malaysia

The U.S

Assume a citizen of Singapore resides permanently in the US and earns dividends from an investment in the shares of a company in UK. Taxing on the basis of residence, which country will this individual be subject to taxation? Multiple choice question. China The UK The US Singapore

The US

VinGroup is a controlled foreign corporation located in a foreign country with an effective tax rate greater than 90% of U.S rate, what will be the amount of foreign income taxable in the U.S? Multiple choice question. The foreign income is not taxable in the U.S 21% of the Subpart F income 15% of the Subpart F income 100% of the Subpart F income

The foreign income is not taxable in the U.S

If a Subpart F income of a controlled foreign corporation with a foreign effective tax rate less than 90% of U.S rate is less 5 percent, what will be the amount of foreign income taxable in the U.S? Multiple choice question. 15% of the Subpart F income 21% of the Subpart F income 100% of the Subpart F income The income is not taxable in the U.S

The income is not taxable in the U.S

True or false: The U.S model treaty exempts interest and royalties from withholding tax. True false question. True False

True

In Malaysia, corporations that undertake a project involving the manufacture of specialized machinery and equipment receive: Multiple choice question. a 100 percent tax exemption for up to 20 years a 10 percent tax exemption for up to 10 years a 100 percent tax exemption for up to 10 years a 10 percent tax exemption for up to 20 years

a 100 percent tax exemption for up to 10 years

Tax issues are important in deciding: a. where to locate a foreign operations b. what legal form the operation should take c. how the operation will be financed Multiple choice question. only c only a and b only a a, b, and c

a, b and c

Tax issues are important in deciding: a. where to locate a foreign operations b. what legal form the operation should take c. how the operation will be financed Multiple choice question. only a a, b, and c only c only a and b

a, b, and c

Which of the following factors determine the amount of income taxes paid to a government? a. the corporate income tax rate b. how taxable income is calculated c. which expenses are deductible Multiple choice question. a, b, c a and c b and c a and b

a, b, c

Tax planning by multinational entities to artificially shift profits to no- or low-tax jurisdictions (tax havens) where there is little or no real economic activity is referred to as: Multiple choice question. tax loss carry forward tax loss carry backward base erosion and profit shifting earnings management

base erosion and profit shifting

Select the best answer to complete the following statement: "The United Nations Model treaty, designed to be used Blank______, assumes Blank______." Multiple choice question. among developed countries, a balance between developed and well-developed countries, an imbalance between developed and developing countries, an imbalance among developing countries, a balance

between developed and developing countries, an imbalance

An important goal of most national tax systems is neutrality. In an international context, one of the standards for neutrality is: Multiple choice question. balance payment import-export neutrality balance trade capital-export neutrality

capital-export neutrality

A major type of taxes imposed on profits earned by companies engaged in international business is: Multiple choice question. state tax federal tax corporate income tax personal income tax

corporate income tax

Under the United Nations Model, which host countries should have more taxing rights when profit repatriation essentially is a one-way street? Multiple choice question. All countries developed countries North American countries developing countries

developing countries

Select the best answer to complete the following statement: "The U.S model treaty exempt Blank______ from withholding tax and establish Blank______ as the maximum withholding rate on dividends." Multiple choice question. interest and royalties, 15 percent royalties, 5 percent dividends, 10 percent interest, 15 percent

interest and royalties, 15 percent

Select the best answer to complete the following statement: A tax system would be considered "capital-export neutral" if a taxpayer's decision whether to invest at home or overseas Blank______ by taxation. Multiple choice question. is made is affected is not affected is determined

is not affected

Select the best answer to complete the following statement: "In the U.S, the Foreign Tax Credit (FTC) allowed is equal to the Blank______ of (1) the actual taxes paid to the foreign government, or (2) the amount of taxes that would have been paid if the income had been earned in the U.S" Multiple choice question. total lower difference higher

lower

Select the best answer to complete the following statement: "Several countries have a Blank______ rate of withholding tax on interest than on dividends. Interest payments are generally Blank______, whereas dividend payments Blank______. Thus, there is an incentive for companies to finance their foreign operations with as much debt and as little equity for possible." Multiple choice question. higher, tax deductible, are not lower, non-deductible, are deductible lower, tax deductible, are not higher, non-deductible, are deductible

lower, tax deductible, are not

Select the best answer to complete the following statement: "An important goal of most national tax systems is Blank______. The tax system should remain in the background, and business, investment and consumption decisions should be made for non-tax reasons." Multiple choice question. to increase tax collection to exempt foreign income taxes neutrality to provide tax credit

neutrality

Select the best answer to complete the following statement: "Beginning 2018, dividends received from foreign subsidiaries are Blank______ U.S corporate income taxation." Multiple choice question. subject to 5%-10% of subject to 15% of no longer subject to subject to 21% of

no longer subject to

Regardless of the approach used in determining the scope of taxation, a second issue related to jurisdiction is: Multiple choice question. the exchange rate to convert tax payment the basis of taxation the currency of tax payment how tax payment is transferred across borders

the basis of taxation

True or false: To determine MNC's foreign tax credit, foreign taxes (both income tax and withholding tax) paid on the income taxable in the U.S must be determined. True false question. True False

true

True or false: Treaty shopping describes a process in which a resident of Country A uses a corporation in Country B to get the benefit of Country B's tax treaty with Country C. True false question. True False

true

Multinational corporations make a number of very important decisions in which taxation is an important variable. Taxes issues are important in deciding all of the following, except: Multiple choice question. where to locate a foreign operation how the operation will be financed what legal form the operation should take which local culture to follow

which local culture to follow

Multinational corporations make a number of very important decisions in which taxation is an important variable. Taxes issues are important in deciding all of the following, except: Multiple choice question. which local culture to follow how the operation will be financed where to locate a foreign operation what legal form the operation should take

which local culture to follow

A major type of taxes imposed on profits earned by companies engaged in international business is: Multiple choice question. federal tax withholding taxes personal income tax state tax

withholding taxes

Assume CNU Company's foreign branch earns income before income taxes of $200,000. Income taxes paid to the foreign government are computed based on a rate of 10%. Sales and other taxes paid to the foreign government are $10,000. CNU is a U.S company. The US income tax before credit is 21%. What is net U.S tax liability if CNU takes the tax credit? Multiple choice question. $35,700 $12,000 $32,000 $22,000

$22,000

Assume CNU Company's foreign branch earns income before income taxes of $200,000. Income taxes paid to the foreign government are computed based on a rate of 10%. Sales and other taxes paid to the foreign government are $10,000. CNU is a U.S company. The US income tax before credit is 21%. What is net U.S tax liability if CNU takes the tax deduction? Multiple choice question. $35,700 $42,000 $37,800 $39,900

$35,700

Regarding to the basis of taxation, to determine jurisdictional authority countries usually use: 1. source of income 2. citizenship 3. residence Multiple choice question. 1, 2 or 3 or their combination Only the combination of 1 and 3 Either 2 or 3 Either 1 or 2

1, 2 or 3 or their combination

The factors used to determine the appropriate amount of U.S taxable income from foreign operations are: 1. Legal form of the foreign operation (branch or corporation) 2. Percentage level of ownership (controlled foreign corporation or not) 3. Effective foreign tax rate ("tax haven" or not) 4. Nature of the foreign source income (Subpart F income or not) (appropriate foreign tax credit basket) Multiple choice question. 1, 2 and 3 2, 3 and 4 3 and 4 1, 2, 3 and 4

1, 2, 3 and 4

Assume that Davis company (a U.S taxpayer) has a subsidiary located in Uzbekistan. The income tax rate in the U.S is 21%, in Uzbekistan is 7.5%, and the withholding tax rate in Uzbekistan is 10%. What is the effective tax rate of Uzbekistan? Is Uzbekistan a tax haven? Multiple choice question. 16.75%. No, it is not a tax haven 15%. Yes, it is a tax haven 16.75%. Yes, it is a tax haven 15%. No, it is not a tax haven

16.75%. Yes, it is a tax haven

To calculate foreign tax credit, which taxes must be determined? 1. Foreign income taxes 2. Foreign withholding taxes 3. Both foreign income taxes and foreign withholding taxes are needed to calculate foreign taxes Multiple choice question. 1 3 2

3

Assume that HKD company (a U.S taxpayer) has a subsidiary located in Zimbabwe. Income tax rate in the U.S is 21%, in Zimbabwe is 25%, withholding tax rate in Zimbabwe is 10%. What is the effective tax rate of Zimbabwe? Is Zimbabwe a tax haven? Multiple choice question. 10%. No, it is not a tax haven 32.5%. No, it is not a tax haven 32.5%. Yes, it is a tax haven 10%. Yes, it is a tax haven

32.5%. No, it is not a tax haven

The Tax Cuts and Jobs Act, passed in 2017, made the most extensive changes to the international tax provisions in U.S tax law since 1986. Besides the adoption of a participation exemption system of taxation in which most foreign subsidiary income is exempt from U.S taxation. Other major international tax provisions of the new law are all of the followings, except: Multiple choice question. Taxation of global intangible low-taxed income Deemed repatriation of accumulated foreign earnings A full adoption of OECD model Imposition of a base erosion anti-abuse tax

A full adoption of OECD model

A Vietnamese investor receives dividend payment from an investment in Amazon common stock. The problem of double taxation arises when: Multiple choice question. Both Vietnam and the US tax this dividend payment The US taxes this dividend payment because it was earned in the US Singapore taxes this dividend payment because the payment was transferred using a Singaporean bank Vietnam taxes the dividend payment because it was earned by a resident of Vietnam

Both Vietnam and the US tax this dividend payment

How is the amount of taxes paid to a government determined? Multiple choice question. By only how taxable income is calculated By the corporate tax rate and the tax bracket of the taxable income By the corporate tax rate and the manner in which taxable income is calculated By how expenses can be deducted for tax purposes

By the corporate tax rate and the manner in which taxable income is calculated

Assume a citizen of Canada resides permanently in the U.S and earns dividends income from an investment in the shares of a Mexican company. Taxing on the basis of citizenship, in which country will this individual be subject to taxation? Multiple choice question. Canada All three countries Mexico The U.S

Canada

On which of the following bases does the U.S levy tax on an income earned by a U.S individual in a foreign country? Multiple choice question. The U.S does not levy tax on foreign income Residence basis and only for dual-citizenship individuals Types of income Citizenship

Citizenship

In determining the net U.S tax liability on taxable foreign income, U.S companies are allowed to: 1. deduct all foreign taxes paid on the related foreign income 2. take a credit for foreign income taxes Multiple choice question. Both 1 and 2 Only 1 Either 1 or 2 Only 2

Either 1 or 2

The overall Foreign Tax Credit (FTC) limitation is calculated as follows: Multiple choice question. ForeignsourcetaxableincomeWorldwidetaxableincomeForeignsourcetaxableincomeWorldwidetaxableincome x U.S taxes after FTC WorldwidetaxableincomeForeigntaxableincomeWorldwidetaxableincomeForeigntaxableincome x U.S taxes after FTC WorldwidetaxableincomeForeignsourcetaxableincomeWorldwidetaxableincomeForeignsourcetaxableincome x U.S taxes before FTC Foreignsourcetaxableincome/WorldwidetaxableincomeForeignsourcetaxableincomeWorldwidetaxableincome x U.S taxes before FTC

Foreign source taxable income / Worldwide taxable income x U.S taxes before FTC

What has been the international trend related to corporate income tax rates? Multiple choice question. All countries have been raised the corporate income taxes significantly In most countries, the trend has been a continuing rise in corporate tax rate Corporate income taxes around the world have remained constant In most countries, the trend has been a continuing reduction in corporate tax rates

In most countries, the trend has been a continuing reduction in corporate tax rates

The tax jurisdictions with abnormally low corporate income tax rates or no corporate income tax at all are known as: Multiple choice question. Tax holiday Tax exemption Tax havens Tax reduction

Tax havens

Select the best answer to complete the following statement: "Blank______ are bilateral agreements between two countries regarding how companies and individuals from one country will be taxed when earning income in the other country." Multiple choice question. Free-trade treaties Tax treaties Investment treaties Income treaties

Tax treaties

One of the two approaches taken on foreign source income issue is: Multiple choice question. Single taxation approach Territory approach Cultural approach Income source approach

Territory approach

Why would a country have tax holidays? Multiple choice question. To increase the amount of national holidays To raise more tax income for the government To compete for foreign investment To protect domestic businesses

To compete for foreign investment

Select the best answer to complete the following statement: "Blank______ describes a process in which a resident of Country A uses a corporation in Country B to get the benefit of Country B's tax treaty with Country C." Multiple choice question. Clientele effect Opinion shopping Tax management Treaty shopping

Treaty shopping

What type of tax is usually levied on the value added at each stage in the production or distribution of a product or service? Multiple choice question. Value withholding tax Production tax Value-added tax Sales tax

Value-added tax