When a subsidiary of an MNC in a foreign country makes capital-related payments to the MNC,the country where that subsidiary is located may require that the:

Question

Quizplus · Accepted Answer

Many countries require withholding taxes to be withheld from capital-related payments made by subsidiaries to their foreign parent companies. This tax is typically a percentage of the payment and is withheld by the subsidiary before the payment is made to the parent company. This is done to ensure that the local government receives its share of taxes on the profits earned by the subsidiary, and also to prevent tax evasion by the parent company. Therefore, choice A is the most appropriate answer.

When a Subsidiary of an MNC in a Foreign Country