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.?

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The U.S. corporation would owe $700,000 in taxes to the U.S. government on the $2,000,000 of income (35% of $2,000,000). However, it can credit the $600,000 paid in the U.K. (30% of $2,000,000) against this amount, leaving $100,000 still owed to the U.S. government.

A US Corporation Is Subject to an Income Tax Rate of of 35