T&T Inc. is a Canada-based MNC that manufacturers stainless steel bathroom fixtures. of $100,000 before foreign taxes. All before-tax earnings are to be paid to the parent as interest. The foreign taxes include an income tax rate of 30 percent and an interest withholding tax of 15 percent. The firm's marginal tax rate in Canada is 40 percent. What wouldbe the firm's after-tax interest income?

Question

Quizplus · Accepted Answer

The foreign income tax is 30%, so $100,000 - $30,000 = $70,000. The interest withholding tax is 15% on $70,000, so $70,000 - $10,500 = $59,500. The firm's after-tax interest income is approximately $60,000.

T&T Inc Is a Canada-Based MNC That Manufacturers Stainless Steel Bathroom