Limni co 6/13

This topic has 3 replies, 3 voices, and was last updated 9 years ago by John Moffat.

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May 22, 2015 at 7:34 am #247848
aishaasad
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Hi,
regarding part c i do not understand that why the dividend capacity of 10,4220 is grossed up to include tax of 6%?
Thank you
May 22, 2015 at 10:47 am #247906
John Moffat
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The question says that Limni pays tax on dividend remittances at 26% but gets credit for the 20% tax that had already been paid on the dividends – so an extra 6%.
November 17, 2016 at 3:52 am #349430
cyh
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Hi Sir, I am confused on the extra 6% tax.
Limni received 15M dividend, o which annual tax of 20% on average has been paid.
So it mean 15M / 0.8= 18.75 original profit in oversea
pay tax in oversea 18.75M x 20% = 3.75M
pay tax to limni local gov when remited the dividend 18.75 x 26%= 4.88M
Difference : 4.88M-3.75M= 1.13M additional tax to Limni local gov
why my answer is different from the examiner answer?
November 17, 2016 at 7:37 am #349485
John Moffat
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The wording in the question could be interpreted in several ways.
I would have done what you have done – I think it is better – and it would certainly have got the marks (even though it is different that what the examiner did).
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