Upgrade to remove ads
International Accounting CH 11
Terms in this set (64)
location, legal form, and financing
what are the three main decisions dictated by tax issues
after-tax profit and cash flows
the decision to make a foreign investment is based on forecasts of ____
branch or subsidiary
what are the two options for the legal form of a business?
capital contributions (equity) or loans (debt)
what are the two methods of financing foreign operations?
dividends or interest payments
what are the two methods for repatriating cash flows generated by a foreign operation?
corporate income and withholding taxes
what are the two major types of taxes imposed on profits earned by companies engaged in international business?
what is the range for most national corporate income tax rates?
what is one way to compete for foreign investment by granting new foreign enterprises a specific tax exemption for a specified time
what are tax jurisdictions with abnormally low corporate income tax rates that companies and individuals have found useful in minimizing their worldwide income taxes
organization for economic cooperation and development
what group has established guidelines for tax regimes to ensure that they cannot be used to avoid taxation in other countries
what is type of tax occurs when the payer of the divided is required to withhold some amount of taxes and remit that amount to the US government
dividends, interest, and royalties
what are the three types of payments typically subject to withholding tax?
typically, is the withholding tax on interest or dividends higher?
what is referred to as a company financing their foreign operations with as much debt and as little equity capital as possible
value added tax
what is often used in lieu of a sales tax and are generally incorporated into the price of a product or service
foreign source income
what refers to income earned overseas?
worldwide (nationality) approach and the territorial approach
what are the two approaches relating to the taxation of foreign source income?
worldwide (nationality) approach
under what approach to foreign source income is all income of a resident of a country or a company incorporated in a country taxed by that country regardless of where the income is earned?
country of residence
under the worldwide approach, where is foreign source income taxed?
Under what approach to foreign source income is only the income earned within the borders of the country taxed?
what is the most economically important country that uses a territorial approach?
source, citizenship, residence, or combo
what are the most common characteristics used to determine jurisdictional authority?
True or False: Because the US levies taxes using a worldwide approach, the worldwide income of an individual holding a US permanent resident card is subject to US taxation even if he or she is not actually living in the US
are companies created or organized in the US considered to be US residents for tax purposes?
is the foreign subsidiary of a US parent considered to be a US resident? if a foreign branch considered to be a US resident?
home country taxes on residence and country where foreign ops is located taxes on source
what is the most common overlap of jurisdictions for corporations?
what is considered an important goal of most national tax systems, meaning that the systems should be remain in the background and business, investment, and consumption decisions should be made for non tax reasons
according to international norms, should the source or residence take precedence?
tax treaties and foreign tax credits
what are two common methods for eliminating the double taxation of foreign income?
deduct all foreign taxes paid or take a credit for foreign income taxes paid
what two options does the US provide US companies to avoid double taxation on foreign source income
the amount of taxes that would have been paid if the income had been earned in the US
The foreign tax credit allowed is equal to the lower of the actual taxes paid to the foreign government or ____
excess foreign tax credits
what may be used to offset additional taxes paid to the US on foreign source income in years in which foreign tax rates are lower than the US tax rate
back 1 and forward 10
how far back and forward can a foreign tax credit be carried?
general income and passive
what are the baskets for the foreign tax credit?
american jobs creation act
what "act" reduced the number of FTC baskets from 9 to 2?
what type of foreign tax credit is allowed for foreign income taxes paid directly by a US taxpayer?
what type of foreign tax credit is allowed for foreign income taxes paid by the foreign subsidiary of a US parent?
grossed up dividend
what refers to the amount of income taxable in the US from a foreign subsidiary which equals the before-tax amount of the dividend (dividend plus taxes deemed to have been paid on income from which the dividend was paid)
dividend received/(1-foreign tax rate)
what is the formula for calculating the grossed up dividend?
US company and must own at least 10% of the voting stock in the foreign company
what are the qualifications for an indirect FTC?
US shareholder must own at least 10% of the stock and hold more than 50% of the voting power
What are the requirements for being considered a controlled foreign corporation?
where are bilateral agreements between two countries regarding how companies and individuals from one country will be taxed when earning income in the other country
alleviate double taxation, facilitate international trade and investment, info sharing, helps in domestic enforcement
what are some of the benefits associated with tax treaties
reduction in withholding taxes
what is one of the most important benefits afforded by tax treaties?
0% interest and royalties, 15% on dividends
according the US model treaties, what withholding rates are recommended on interest, dividends, and royalties?
5% direct investment dividends
15% portfolio dividends
what are the recommended withholding rates from the OECD model?
what 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
controlled foreign corporation
what rules were created by the US to prevent US companies from using tax havens to avoid paying US taxes
income that is easily movable to a low-tax jurisdiction aka CFC income
what is subpart F income?
>90% of the US rate
There is a safe harbor for subpart F income in what jurisdictions?
income derived from insurance of US risks, income from countries engaged in international boycotts, certain illegal payments, and foreign base company income
what are the four types of subpart F income?
If subpart F income is less than __ of the CFC's total income then none of the CFC's income will be taxed currently
If subpart F income is between ___ of the CFC's total income, then that percentage of the CFC's income which is subpart F income will be taxed currently
If subpart F income is greater than ___ of the CFC's total income, then 100% of the CFC's income will be taxed currently
IF the foreign tax rate is greater than 90% of the US corporate income tax rate, then how much of the CFC's income is considered to be subpart F income?
what currency is the one in which the foreign operation primarily conducts business and can be either a foreign currency or the US dollar
what exchange rate is used to translate foreign branch net income from a foreign functional currency to US dollars
taxes paid to the foreign government; payment date
What is added back to net income when translating foreign branch income? and at what exchange rate?
spot rate at date of distribution, the difference is a G/L
what exchange rate is used when a foreign subsidiary repatriates its income to the parent?
spot rate on date of payment
what exchange rate is used to translate foreign subsidiary income in the form of dividends being paid to the US parent?
taxes deemed paid on the dividend; payment date spot rate
what is added back to the amount of dividends paid by a foreign sub to a US parent and using which exchange rate?
translated deemed taxes paid
when foreign subsidiaries pay dividends to US parents, what amount determines the foreign tax credit of the parent?
DISC and FSC
what were two short lived export incentive programs that have since been replaced due to foreign opposition
THIS SET IS OFTEN IN FOLDERS WITH...
International Accounting - Chapter 7
International Accounting - Chapter 8
chapter 8 international
International Accounting - Chapter 8
YOU MIGHT ALSO LIKE...
Accy 190 ch. 11
International Accounting final exam
OTHER SETS BY THIS CREATOR
International CH 8
International Ch 7
International Accounting CH 4 & 5
International Accounting Ch 1 & 2
OTHER QUIZLET SETS
micro exam 5
Ap Bio Review Questions
Spine boarding, CPR, shoulder