Question 1

What is a major limitation to the apparent incentive of tax holidays?

Accepted Answer

A)  If an MNC is taxed on worldwide income, it will eventually pay tax on the foreign income when it is repatriated. 
B)  Income earned by multinational corporations must remain in the foreign country offering the tax holiday. 
C)  The tax holidays are only available to large multinational corporations of wealthier nations. 
D)  Tax holidays are offered only by governments with the ten weakest economies. 
A)  If an MNC is taxed on worldwide income, it will eventually pay tax on the foreign income when it is repatriated. 
B)  Income earned by multinational corporations must remain in the foreign country offering the tax holiday. 
C)  The tax holidays are only available to large multinational corporations of wealthier nations. 
D)  Tax holidays are offered only by governments with the ten weakest economies.

Question 2

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 3

What is the U.S. policy concerning taxing income of a U.S. corporation's foreign subsidiary?

Accepted Answer

A)  Tax is imposed on the foreign subsidiary income in the year it is earned. 
B)  Tax is paid on the foreign subsidiary's income when the profits are returned to the U.S. parent as dividends. 
C)  The government of the U.S. does not tax foreign source income. 
D)  Tax credits for losses incurred by the foreign subsidiary are recognized by the parent currently, but taxes on profits are deferred until dividends are paid. 
A)  Tax is imposed on the foreign subsidiary income in the year it is earned. 
B)  Tax is paid on the foreign subsidiary's income when the profits are returned to the U.S. parent as dividends. 
C)  The government of the U.S. does not tax foreign source income. 
D)  Tax credits for losses incurred by the foreign subsidiary are recognized by the parent currently, but taxes on profits are deferred until dividends are paid.

Question 4

To calculate U.S. tax, what exchange rate must be used to translate foreign branch net income?

Accepted Answer

A)  Current rate 
B)  Rate at the beginning of the year 
C)  Average rate for the year 
D)  Rate at the end of the year 
A)  Current rate 
B)  Rate at the beginning of the year 
C)  Average rate for the year 
D)  Rate at the end of the year

Question 5

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

Accepted Answer

A)  The UN model assumes all countries are economic equals, whereas the OECD model does not. 
B)  The UN model 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 UN model assumes all countries are economic equals, whereas the OECD model does not. 
B)  The UN model 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 6

An indirect foreign tax credit arises when:

Accepted Answer

A)  taxes paid by a parent on foreign branch income is deducted from taxes owed to the parent's home country. 
B)  taxes paid by a foreign subsidiary are taken as a credit against a parent's taxes when dividends are received from the subsidiary. 
C)  taxing jurisdictions agree to share the taxes paid by a foreign subsidiary. 
D)  a foreign taxing jurisdiction does not tax a subsidiary within its jurisdiction and allows the parent country to tax the foreign source income. 
A)  taxes paid by a parent on foreign branch income is deducted from taxes owed to the parent's home country. 
B)  taxes paid by a foreign subsidiary are taken as a credit against a parent's taxes when dividends are received from the subsidiary. 
C)  taxing jurisdictions agree to share the taxes paid by a foreign subsidiary. 
D)  a foreign taxing jurisdiction does not tax a subsidiary within its jurisdiction and allows the parent country to tax the foreign source income.

Question 7

What is the "Safe Harbor Rule?"

Accepted Answer

A)  If a foreign tax rate is 90% or more of the U.S. corporate tax rate, no part of a controlled foreign corporation's income is considered Subpart F income. 
B)  This is a guideline issued by the OEDC that encourages developed countries to open branches in underdeveloped countries. 
C)  If a controlled foreign corporation's Subpart F income is less than 10% of its total income, it will not be taxed currently by the U.S. government. 
D)  If a controlled foreign corporation's Subpart F income is less than 10% of its total income, it will not be taxed until dividends are received by the parent. 
A)  If a foreign tax rate is 90% or more of the U.S. corporate tax rate, no part of a controlled foreign corporation's income is considered Subpart F income. 
B)  This is a guideline issued by the OEDC that encourages developed countries to open branches in underdeveloped countries. 
C)  If a controlled foreign corporation's Subpart F income is less than 10% of its total income, it will not be taxed currently by the U.S. government. 
D)  If a controlled foreign corporation's Subpart F income is less than 10% of its total income, it will not be taxed until dividends are received by the parent.

Question 8

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 9

Under U.S. tax law, what is a "resident?"

Accepted Answer

A)  A person living in the United States for 183 days or more in a year 
B)  A person holding a "green card" from the U.S. Immigration and Naturalization Service 
C)  A corporation organized in the United States 
D)  All of the above 
A)  A person living in the United States for 183 days or more in a year 
B)  A person holding a "green card" from the U.S. Immigration and Naturalization Service 
C)  A corporation organized in the United States 
D)  All of the above

Question 10

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 11

What is "Subpart F" income?

Accepted Answer

A)  All foreign source income 
B)  Foreign income that is not taxable by foreign jurisdictions 
C)  Income that is easily moved to low-tax jurisdiction 
D)  Foreign source income that is exempt from U.S. taxation 
A)  All foreign source income 
B)  Foreign income that is not taxable by foreign jurisdictions 
C)  Income that is easily moved to low-tax jurisdiction 
D)  Foreign source income that is exempt from U.S. taxation

Question 12

Zen Energies is a Chinese branch of Super Sigma Inc., incorporated in U.S. In the year ending Dec. 31, 2019, the net income of Zen was 25 million Yuan before tax of 25%. During the year the average exchange rate was 0.16379 Yuan per dollar. The exchange rate on the date of payment of taxes is was 0.16474 Yuan per dollar. Determine the amount of U.S. taxable income.

Accepted Answer

A)  $3.0711 million 
B)  $114.475 million 
C)  $18.75 million 
D)  $4.1007 million 
A)  $3.0711 million 
B)  $114.475 million 
C)  $18.75 million 
D)  $4.1007 million

Question 13

Which of the following statements about China is correct?

Accepted Answer

A)  It has not enacted any legislation to allow tax holidays. 
B)  It has a tax treaty with the United States. 
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)  It has a tax treaty with the United States. 
C)  It is isolationist and shuns foreign investment within its borders. 
D)  None of the above statements is correct.

Question 14

In the context of international taxation, the Bahamas, Lichtenstein, and Monaco are considered by the OEDC as:

Accepted Answer

A)  tax holidays. 
B)  tax shelters. 
C)  tax havens. 
D)  tax centers. 
A)  tax holidays. 
B)  tax shelters. 
C)  tax havens. 
D)  tax centers.

Question 15

What is a tax holiday?

Accepted Answer

A)  A trip made to tax havens to buy goods free of sales tax. 
B)  The time between the date of filing the corporate income tax return and the date when taxes are due to be paid. 
C)  This is a period of time when corporations are relieved of paying various taxes. 
D)  This is the deadline for filing federal tax returns. 
A)  A trip made to tax havens to buy goods free of sales tax. 
B)  The time between the date of filing the corporate income tax return and the date when taxes are due to be paid. 
C)  This is a period of time when corporations are relieved of paying various taxes. 
D)  This is the deadline for filing federal tax returns.

Question 16

Which of the following affect the effective corporate tax rate?

Accepted Answer

A)  Tax-based incentives 
B)  Local corporate tax rate 
C)  Method of determining taxable income 
D)  All of the above 
A)  Tax-based incentives 
B)  Local corporate tax rate 
C)  Method of determining taxable income 
D)  All of the above

Question 17

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 tax will be owed to the U.S. government on the $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 18

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 did not tax Jane's dividend. Country X is using what kind of approach toward foreign source income?

Accepted Answer

A)  Nationality approach 
B)  Worldwide approach 
C)  Legalistic approach 
D)  Territorial approach 
A)  Nationality approach 
B)  Worldwide approach 
C)  Legalistic approach 
D)  Territorial approach

Question 19

What causes double taxation?

Accepted Answer

A)  A taxpayer being subject to tax laws in multiple jurisdictions 
B)  Profits increasing excessively from year to year 
C)  Penalties imposed by a taxing authority for non-payment of taxes 
D)  None of the above 
A)  A taxpayer being subject to tax laws in multiple jurisdictions 
B)  Profits increasing excessively from year to year 
C)  Penalties imposed by a taxing authority for non-payment of taxes 
D)  None of the above

Question 20

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 in 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 in 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

What is a major limitation to the apparent incentive of tax holidays?

What is the U.S. policy concerning taxing income of a U.S. corporation's foreign subsidiary?

To calculate U.S. tax, what exchange rate must be used to translate foreign branch net income?

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

An indirect foreign tax credit arises when:

What is the "Safe Harbor Rule?"

What is a withholding tax?

Under U.S. tax law, what is a "resident?"

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 "Subpart F" income?

Which of the following statements about China is correct?

In the context of international taxation, the Bahamas, Lichtenstein, and Monaco are considered by the OEDC as:

What is a tax holiday?

Which of the following affect the effective corporate tax rate?

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 tax will be owed to the U.S. government on the $10,000,000 of Japanese branch income?

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 did not tax Jane's dividend. Country X is using what kind of approach toward foreign source income?

What causes double taxation?

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

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

International Transfer Pricing

Management Accounting Issues in Multinational Corporations

Auditing and Corporate Governance: An International Perspective

International Sustainability Reporting

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Exam 8: International Taxation

What is a major limitation to the apparent incentive of tax holidays?

What is the U.S. policy concerning taxing income of a U.S. corporation's foreign subsidiary?

To calculate U.S. tax, what exchange rate must be used to translate foreign branch net income?

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

An indirect foreign tax credit arises when:

What is the "Safe Harbor Rule?"

What is a withholding tax?

Under U.S. tax law, what is a "resident?"

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 "Subpart F" income?

Which of the following statements about China is correct?

In the context of international taxation, the Bahamas, Lichtenstein, and Monaco are considered by the OEDC as:

What is a tax holiday?

Which of the following affect the effective corporate tax rate?

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 tax will be owed to the U.S. government on the $10,000,000 of Japanese branch income?

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 did not tax Jane's dividend. Country X is using what kind of approach toward foreign source income?

What causes double taxation?

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

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

International Transfer Pricing

Management Accounting Issues in Multinational Corporations

Auditing and Corporate Governance: An International Perspective

International Sustainability Reporting

Filters