Question 1

Which of the following statements about China is correct?

Accepted Answer

A) It has not enacted any legislation to allow tax holidays. 
B) In 2002 it surpassed the U.S.as the largest recipient of foreign direct investment. 
C) It is isolationist and shuns foreign investment within its borders. 
D) None of the above statements is correct. 
A) It has not enacted any legislation to allow tax holidays. 
B) In 2002 it surpassed the U.S.as the largest recipient of foreign direct investment. 
C) It is isolationist and shuns foreign investment within its borders. 
D) None of the above statements is correct.

Question 2

While the U.S.has tax treaties with more than 50 countries,it does not have a treaty with Brazil,which is a major recipient of U.S.foreign direct investment. What is the reason for a lack of a U.S.-Brazil treaty regarding withholding taxes?

Accepted Answer

A) The subsidiaries in Brazil do not pay dividends. 
B) The advantage of a treaty would primarily go to the U.S.,so Brazil is not interested in a treaty. 
C) The advantage of a treaty would primarily go to Brazil,so the U.S.is not interested in a treaty. 
D) United States has a policy against making tax treaties with countries in South America. 
A) The subsidiaries in Brazil do not pay dividends. 
B) The advantage of a treaty would primarily go to the U.S.,so Brazil is not interested in a treaty. 
C) The advantage of a treaty would primarily go to Brazil,so the U.S.is not interested in a treaty. 
D) United States has a policy against making tax treaties with countries in South America.

Question 3

What is a primary difference between the OECD and UN model tax treaties?

Accepted Answer

A) The model espoused by the UN assumes all countries are equals,whereas the OECD model does not. 
B) The model treaty advocated by the UN grants more taxing rights to the host country than does the OECD model when income repatriation is out of developing countries. 
C) The model treaty of the UN gives more taxing rights to well-developed countries than developing countries. 
D) All of the above are differences between the OECD and UN models. 
A) The model espoused by the UN assumes all countries are equals,whereas the OECD model does not. 
B) The model treaty advocated by the UN grants more taxing rights to the host country than does the OECD model when income repatriation is out of developing countries. 
C) The model treaty of the UN gives more taxing rights to well-developed countries than developing countries. 
D) All of the above are differences between the OECD and UN models.

Question 4

What is a value added tax (VAT)?

Accepted Answer

A) It is the European version of a sales tax,which is paid by the purchaser based on sales price. 
B) tax on the difference between the cost of a product and its selling price 
C) the tax paid by a foreign corporation on its fixed assets 
D) This is the name of the corporate income tax in Canada,Australia,and the United Kingdom. 
A) It is the European version of a sales tax,which is paid by the purchaser based on sales price. 
B) tax on the difference between the cost of a product and its selling price 
C) the tax paid by a foreign corporation on its fixed assets 
D) This is the name of the corporate income tax in Canada,Australia,and the United Kingdom.

Question 5

How is a foreign subsidiary different from a foreign branch of a domestic corporation?

Accepted Answer

A) Subsidiaries always generate more foreign source income than branches do. 
B) The subsidiary is a company incorporated in the foreign country,whereas a branch is not a separate corporation. 
C) A subsidiary is created to manufacture and distribute products in foreign markets,whereas a branch's only function is sales in the foreign market. 
D) The income of a subsidiary is taxable by the country where it is located,but branch income is not subject to tax by the country where it does business. 
A) Subsidiaries always generate more foreign source income than branches do. 
B) The subsidiary is a company incorporated in the foreign country,whereas a branch is not a separate corporation. 
C) A subsidiary is created to manufacture and distribute products in foreign markets,whereas a branch's only function is sales in the foreign market. 
D) The income of a subsidiary is taxable by the country where it is located,but branch income is not subject to tax by the country where it does business.

Question 6

What is a withholding tax?

Accepted Answer

A) Income tax paid on corporate earnings. 
B) an amount subtracted from a dividend payout and remitted to the government 
C) This is an income tax corporations pay to local governments in addition to the national income tax. 
D) taxes that lower the effective tax rate in a country 
A) Income tax paid on corporate earnings. 
B) an amount subtracted from a dividend payout and remitted to the government 
C) This is an income tax corporations pay to local governments in addition to the national income tax. 
D) taxes that lower the effective tax rate in a country

Question 7

There are two primary taxes imposed on profits earned by corporations in international trade. One is the corporate income tax. What is the other type of tax on earnings of multinational corporations?

Accepted Answer

A) excise tax 
B) payroll tax 
C) withholding tax 
D) value-added tax 
A) excise tax 
B) payroll tax 
C) withholding tax 
D) value-added tax

Question 8

What is the optimal tax objective for multinational corporations?

Accepted Answer

A) minimize domestic taxes paid on worldwide income 
B) minimize worldwide taxes paid,within the limitations of applicable tax law 
C) minimize worldwide taxes paid 
D) minimize foreign taxes 
A) minimize domestic taxes paid on worldwide income 
B) minimize worldwide taxes paid,within the limitations of applicable tax law 
C) minimize worldwide taxes paid 
D) minimize foreign taxes

Question 9

How does the U.S.government tax controlled foreign corporations (CFC)differently from other subsidiaries?

Accepted Answer

A) All income of the CFC is taxed by the U.S.in the year it is earned rather than when dividends are received. 
B) Some income of the CFC is taxed by the U.S.in the year it is earned rather than when dividends are received. 
C) None of the income generated by the CFC is subject to U.S.tax. 
D) Only interest income from CFC is taxed in the year received by the U.S.government. 
A) All income of the CFC is taxed by the U.S.in the year it is earned rather than when dividends are received. 
B) Some income of the CFC is taxed by the U.S.in the year it is earned rather than when dividends are received. 
C) None of the income generated by the CFC is subject to U.S.tax. 
D) Only interest income from CFC is taxed in the year received by the U.S.government.

Question 10

The exchange gain or loss on repatriated funds from a foreign branch is calculated by multiplying the nominal amount of the funds by:

Accepted Answer

A) the difference between the exchange rate at the beginning of the year and the exchange rate at the end of the year. 
B) the difference between the exchange rate on the date of repatriation and the exchange rate used to translate the branch's pretax income. 
C) the difference between the current exchange rate and the exchange rate at the end of the year. 
D) the difference between the exchange rate on the date of repatriation and the exchange rate at the beginning of the year. 
A) the difference between the exchange rate at the beginning of the year and the exchange rate at the end of the year. 
B) the difference between the exchange rate on the date of repatriation and the exchange rate used to translate the branch's pretax income. 
C) the difference between the current exchange rate and the exchange rate at the end of the year. 
D) the difference between the exchange rate on the date of repatriation and the exchange rate at the beginning of the year.

Question 11

A U.S.corporation is subject to an income tax rate of 35% and has a branch in the U.K.,which paid the national corporate tax rate of 30% on its earnings there. The branch generated taxable income from operations in the U.K.equivalent to $2,000,000. What is the amount of the taxes owed to the U.S.government on the income generated in the U.K.?

Accepted Answer

A) $600,000 
B) $700,000 
C) $100,000 
D) $0 
A) $600,000 
B) $700,000 
C) $100,000 
D) $0

Question 12

In following the international norm concerning tax jurisdiction,how would double taxation be eliminated?

Accepted Answer

A) The subsidiary's home country would allow tax credits for taxes paid to the parent's home country. 
B) The parent company's home country would allow tax credits for taxes paid to the subsidiary's home country. 
C) The home countries of both the parent and the subsidiary would forego taxation on the income earned by the subsidiary. 
D) none of the above 
A) The subsidiary's home country would allow tax credits for taxes paid to the parent's home country. 
B) The parent company's home country would allow tax credits for taxes paid to the subsidiary's home country. 
C) The home countries of both the parent and the subsidiary would forego taxation on the income earned by the subsidiary. 
D) none of the above

Question 13

The Organization for Economic Cooperation and Development (OECD)has established guidelines to eliminate tax havens. Why,then,can the OECD (as of 2004)still identify over 30 countries as tax havens?

Accepted Answer

A) The definition of tax haven continuously changes. 
B) The concept of tax haven is supported by the United Nations. 
C) The OECD has no enforcement powers. 
D) The OECD lacks the willingness to enforce the guidelines. 
A) The definition of tax haven continuously changes. 
B) The concept of tax haven is supported by the United Nations. 
C) The OECD has no enforcement powers. 
D) The OECD lacks the willingness to enforce the guidelines.

Question 14

Use the following to answer questions :
A Japanese branch of a U.S.corporation paid $4,200,000 in taxes to the government of Japan on income it generated there. The corporation is subject to a 35% tax rate in the U.S.
-How much foreign tax credit can be taken in calculating the taxes owed to the U.S.on $10,000,000 of Japanese branch income?

Accepted Answer

A) $4,200,000 
B) $3,500,000 
C) $0 
D) $7,000,000 
A) $4,200,000 
B) $3,500,000 
C) $0 
D) $7,000,000

Question 15

If a company is unable to use all its foreign tax credit in a tax year,what happens to the excess?

Accepted Answer

A) It is carried forward until it is used up. 
B) It is carried back 3 years and forward 5 years. 
C) It is carried back 1 year and forward 10 years. 
D) It is lost forever. 
A) It is carried forward until it is used up. 
B) It is carried back 3 years and forward 5 years. 
C) It is carried back 1 year and forward 10 years. 
D) It is lost forever.

Question 16

Under U.S.tax law,what is the basis for the overall foreign tax credit limitation?

Accepted Answer

A) to make sure that foreign governments get their fair share of a foreign subsidiary's income 
B) to ensure that the foreign tax credit taken by a corporation does not exceed the actual foreign tax it paid 
C) to make sure that the foreign tax credit taken by a corporation does not exceed the amount of taxes the foreign affiliate would have paid in the U.S. 
D) to minimize world-wide taxes on the U.S.corporation 
A) to make sure that foreign governments get their fair share of a foreign subsidiary's income 
B) to ensure that the foreign tax credit taken by a corporation does not exceed the actual foreign tax it paid 
C) to make sure that the foreign tax credit taken by a corporation does not exceed the amount of taxes the foreign affiliate would have paid in the U.S. 
D) to minimize world-wide taxes on the U.S.corporation

Question 17

Jane,a citizen of Country X,received a corporate dividend in the amount of £10,000 from a company in the U.K. Country X taxed Jane's dividend as ordinary income. Country X is using what kind of approach toward foreign source income?

Accepted Answer

A) territorial approach 
B) worldwide approach 
C) legalistic approach 
D) None of the above 
A) territorial approach 
B) worldwide approach 
C) legalistic approach 
D) None of the above

Question 18

The definition of a "permanent establishment" is a key article of the OECD's model tax treaty. Which of the following would NOT be considered a permanent establishment by the OECD?

Accepted Answer

A) branch 
B) mine 
C) storage facility 
D) construction site 
A) branch 
B) mine 
C) storage facility 
D) construction site

Question 19

Under U.S.tax law,what happens to excess foreign tax credit?

Accepted Answer

A) It reduces taxes on ordinary income in the current year. 
B) It can be carried back one year to calculate a refund on additional taxes paid to the U.S.on foreign source income. 
C) It is lost unless the average foreign tax rate paid by the company in the future is greater than the U.S.tax rate. 
D) none of the above 
A) It reduces taxes on ordinary income in the current year. 
B) It can be carried back one year to calculate a refund on additional taxes paid to the U.S.on foreign source income. 
C) It is lost unless the average foreign tax rate paid by the company in the future is greater than the U.S.tax rate. 
D) none of the above

Question 20

Controlled foreign corporations (CFC)will not be taxed on their foreign income currently if:

Accepted Answer

A) the foreign tax rate is less than 90% of the U.S.corporate income tax rate. 
B) Subpart F income is less than 70% of the CFC's total income. 
C) Subpart F income is less than 5% of the CFC's total income. 
D) none of the above 
A) the foreign tax rate is less than 90% of the U.S.corporate income tax rate. 
B) Subpart F income is less than 70% of the CFC's total income. 
C) Subpart F income is less than 5% of the CFC's total income. 
D) none of the above

Which of the following statements about China is correct?

While the U.S.has tax treaties with more than 50 countries,it does not have a treaty with Brazil,which is a major recipient of U.S.foreign direct investment. What is the reason for a lack of a U.S.-Brazil treaty regarding withholding taxes?

What is a primary difference between the OECD and UN model tax treaties?

What is a value added tax (VAT)?

How is a foreign subsidiary different from a foreign branch of a domestic corporation?

What is a withholding tax?

There are two primary taxes imposed on profits earned by corporations in international trade. One is the corporate income tax. What is the other type of tax on earnings of multinational corporations?

What is the optimal tax objective for multinational corporations?

How does the U.S.government tax controlled foreign corporations (CFC)differently from other subsidiaries?

The exchange gain or loss on repatriated funds from a foreign branch is calculated by multiplying the nominal amount of the funds by:

In following the international norm concerning tax jurisdiction,how would double taxation be eliminated?

The Organization for Economic Cooperation and Development (OECD)has established guidelines to eliminate tax havens. Why,then,can the OECD (as of 2004)still identify over 30 countries as tax havens?

If a company is unable to use all its foreign tax credit in a tax year,what happens to the excess?

Under U.S.tax law,what is the basis for the overall foreign tax credit limitation?

Jane,a citizen of Country X,received a corporate dividend in the amount of £10,000 from a company in the U.K. Country X taxed Jane's dividend as ordinary income. Country X is using what kind of approach toward foreign source income?

The definition of a "permanent establishment" is a key article of the OECD's model tax treaty. Which of the following would NOT be considered a permanent establishment by the OECD?

Under U.S.tax law,what happens to excess foreign tax credit?

Controlled foreign corporations (CFC)will not be taxed on their foreign income currently if:

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

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Exam 11: International Taxation

Which of the following statements about China is correct?

While the U.S.has tax treaties with more than 50 countries,it does not have a treaty with Brazil,which is a major recipient of U.S.foreign direct investment. What is the reason for a lack of a U.S.-Brazil treaty regarding withholding taxes?

What is a primary difference between the OECD and UN model tax treaties?

What is a value added tax (VAT)?

How is a foreign subsidiary different from a foreign branch of a domestic corporation?

What is a withholding tax?

There are two primary taxes imposed on profits earned by corporations in international trade. One is the corporate income tax. What is the other type of tax on earnings of multinational corporations?

What is the optimal tax objective for multinational corporations?

How does the U.S.government tax controlled foreign corporations (CFC)differently from other subsidiaries?

The exchange gain or loss on repatriated funds from a foreign branch is calculated by multiplying the nominal amount of the funds by:

In following the international norm concerning tax jurisdiction,how would double taxation be eliminated?

The Organization for Economic Cooperation and Development (OECD)has established guidelines to eliminate tax havens. Why,then,can the OECD (as of 2004)still identify over 30 countries as tax havens?

If a company is unable to use all its foreign tax credit in a tax year,what happens to the excess?

Under U.S.tax law,what is the basis for the overall foreign tax credit limitation?

Jane,a citizen of Country X,received a corporate dividend in the amount of £10,000 from a company in the U.K. Country X taxed Jane's dividend as ordinary income. Country X is using what kind of approach toward foreign source income?

The definition of a "permanent establishment" is a key article of the OECD's model tax treaty. Which of the following would NOT be considered a permanent establishment by the OECD?

Under U.S.tax law,what happens to excess foreign tax credit?

Controlled foreign corporations (CFC)will not be taxed on their foreign income currently if:

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

Filters