Avon\'s Foreign-Source Income. Avon is a U.S.-based direct seller of a wide arra

Question

Avon's Foreign-Source Income. Avon is a U.S.-based direct seller of a wide array of products. Avon markets leading beauty, fashion, and home products in more than 100 countries. As part of the training in its corporate treasury offices, it has its interns build a spreadsheet analysis of the following hypothetical subsidiary eamings/distribution analysis. Use the tax analysis presented in the popup window for your basic structure, EEB a. What is the total tax payment, foreign and domestic combined, for this income? b. What is the effective tax rate paid on this income by the US.-based parent company? c. What would be the total tax payment and effective tax rate if the foreign corporate tax rate was 45% and there were no withholding taxes on dividends? d. What would be the total tax payment and effective tax rate if the income was eaned by a branch of the U.S. corporation? Case 1 28% 35% 15% 100% 100% Case 2 D Baseline Values a Foreign corporate income tax rate b U.S. corporate income tax rate c Foreign dividend withholding tax rate d US. ownership in foreign firm e Dividend payout rate of foreign firm 45% 0% 100% 100% Foreign Subsidiary Tax Computation Taxable income of foreign subsidiary 2 Foreign corporate income tax 3 Net income available for distribution 4 Retained earnings 5 Distributed earnings 6 Distribution to U.S. parent company 7 Withholding taxes on dividends 8 Net remittance to U.S. parent $3,400,000 (952,000) $2,448,000 $3,400,000 (1,530,000) $1,870,000 2,448,000 2,448,000 367,200 $2,080,800 1,870,000 1,870,000 $1,870,000

Explanation / Answer

1.Total tax paymet Foreign & Deomesic

2.Effective tax rate on income by US parent company

3.If foreign tax rate is 45% and no with holding tax rate

Income of foreign subidiaries 3400000

Les Tax @ 45% 1530000

Net income = dividend 1870000

US Corpoarate

tax liabiliies in US 3400000*35% = 1190000

tax paid 1530000

Excess credit 340000

Net tax 1190000

Effective tax 1190000/3400000 = 35%

case 1 case2 Foreign Income tax paid 952000 1530000 Foreign withholding tax paid 367200 0 Domestc tax 0 0 Total tax paid 1319200 1530000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.