When excess tax credits go unused,the foreign tax liability for a branch is greater than the corresponding U.S.tax liability when the foreign income tax rate is greater than the U.S.rate.Calculate the total tax liability for a wholly-owned subsidiary when excess tax credits cannot be used in a country given: U.S.tax rate = 35%
Foreign tax rate = 39%
Withholding tax rate = 5%

Question

Quizplus · Accepted Answer

Total tax liability:= foreign income tax rate + withholding tax rate - (foreign income tax rate × withholding tax rate)= 0.39 + 0.05 - (0.39 × 0.05) = 42.05%

When Excess Tax Credits Go Unused,the Foreign Tax Liability for a Branch