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In foreign subsidy, if there are inter-company sales involved from parent to subsidy, profit of the parent co. is added before tax applicable at home rate.
This question mentioned contribution but not profit, is that the reason its not been added back before applying tax at home?
But is had been added back – see workings 7. The figures brought in for the contribution are after accounting for the tax on it.
(I am puzzled why you should think that it being contribution and not profit should make any difference – contribution is profit before fixed overheads, and since the fixed overheads aren’t changing, the extra contribution is the extra profit!!)
Hi John. When calculating the tax shield why PV is calculated instead of annuity?
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