Please define and Explain the difference between Worldwide and Territorial tax p

Question

Please define and Explain the difference between Worldwide and Territorial tax policies. (B) Please define and explain current US tax policy relative to overseas profit. ( C ) Assume Company A has two foreign subsidiaries, X and Y. Company A has a 30% domestic tax rate. The current year probability for the two subsidiaries is as follows:

X

Y

Pre tax profit

2000

1500

Taxes

-900

-300

Net income

1100

1200

Assume Company A dividends all current year Net Income from the two subsidiaries. Please calculate what US taxes are due or what Express Foreign Tax credits are generated by such a dividend policy

X

Y

Pre tax profit

2000

1500

Taxes

-900

-300

Net income

1100

1200

Explanation / Answer

Solution:

(A). Caluculation of Net Income:

Particulars X Y Pre Tax Profit 2,000 1,500 Taxes 30% ( 2,000 * 30 / 100) 600 450 Net Income 1,400 1,050

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