Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › ACCA P4: Transfer prices – tax relief on taxes paid abroad
- This topic has 3 replies, 2 voices, and was last updated 9 years ago by
John Moffat.
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- April 3, 2015 at 8:15 am #239993
Dear Tutor,
Could you please clarify whether one should always include the abroad withholding tax to the tax relief of Holding Company?
Thus, the answer for Q12 per BPP practice and revision kit includes the abroad withholding tax to the tax relief alongside with the foreign income tax paid, despite the question states «any corporate tax paid overseas on income remitted to the UK may be credited against UK tax liability».
At that, Q39 per BPP study text is quite a good question, though it does not allow to assess whether foreign withholding tax should be included to the tax relief of the holding company.
Thank you in advance.
April 4, 2015 at 6:32 am #240072I am on vacation at the moment away from home, and so I do not have the BPP Revision Kit with me.
However, in general, the rule is that you show the foreign tax outflow in calculating the net cash flow in the foreign currency. Then you convert the net cash flow to the home currency. Then you calculate the tax charge in the home country and subtract the tax that has been suffered in the foreign country .
If that does not help then please ask again after Friday, when I will be back home and have the book in front of me 🙂
April 9, 2015 at 12:52 pm #240652Thank you. I shall wait till Friday.
Though, let me clarify the question.There are two kinds of tax: Income Tax and Tax on dividends.
It’s clear that we should account for Income Tax paid abroad for tax relief – if the Treaty on double taxation is agreed.However, what about tax on dividends paid abroad?
Are there any general rules thereon? Should I always include the tax on dividends to the tax relief or not ?
Some questions do, while others don’t.April 10, 2015 at 6:10 pm #240791The question will have to tell you the tax rule applicable to tax on dividends (although to be honest I cannot remember any recent real exam questions where tax on dividends has been relevant).
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