Shelley Burns is a Canadian resident living in Sudbury, Ontario. During 2020, she earns $23,000 of business income through a permanent establishment located in a foreign country. Income taxes of $2,300 were assessed and withheld at the source on that income. All amounts are in Canadian dollars. Assume that her marginal combined federal/provincial tax rate is 42 percent and that the foreign tax credit is equal to the tax withheld. Determine her after tax retention and overall tax rate on her foreign source business income.

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The Answer of Shelley Burns is a Canadian resident living in Sudbury, Ontario. During 2020, she earns $23,000 of business income through a permanent establishment located in a foreign country. Income taxes of $2,300 were assessed and withheld at the source on that income. All amounts are in Canadian dollars. Assume that her marginal combined federal/provincial tax rate is 42 percent and that the foreign tax credit is equal to the tax withheld. Determine her after tax retention and overall tax rate on her foreign source business income.

Shelley Burns Is a Canadian Resident Living in Sudbury, Ontario