VI Basics

Question 1

Branch advantages disadvantages (see below subsidiary advantages)

Answer 1

1.geographical outpost, will be often treated as PE (not al) 2.simpler to operate–>reduction in cost 3.losses can be absorbed, profits belong to one entity 4.usually no foreign capital tax, no WHT on repatriation, assets transfer without tax consequences

Question 2

Subsidiary

Answer 2

1.limited liability 2.better local image, possibly easier access to local tax incentives 3. flexible profit repatriation dividend declared to suit parent co provide choice in sale of shares or business use of losses may be restricted may involve complex compliance with CT CFC rules

Question 3

exemption

Answer 3

tax is paid in source country and no further tax in the country of residence

Question 4

deduction

Answer 4

tax is paid in source country and the net amount taxed in the country of residence

Question 5

credit full credit (subsidize, tax sparing???) ordinary credit (overall limit, class of income)

Answer 5

tax paid in both countries but allowance is given in residency country for tax already paid in s c. Often limited to the tax rate in r c.