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November 22, 2020 at 11:53 am
In the Oblivia project, why weren’t the Maintenance costs also deducted before taxable profits as this is a tax deductible expense and therefore reduce the tax liability? Then after tax calculation, add back the TAD? Although the cash flows would still net off, the tax liability would be different?
November 22, 2020 at 1:18 pm
Nevermind, I have read through the previous comments and realised you have already answered this question. Although I still don’t understand why, I will take the advice from your replies.
October 17, 2020 at 2:33 pm
Why did not the working capital start from year zero and recoup in year 5 as usual?
John Moffat says
October 17, 2020 at 3:42 pm
If you are referring to example 4, then there is no mention of any requirement for working capital in the question!
October 18, 2020 at 11:35 pm
So if no requirement is mentioned in a question on Working Capital, I can decide to start from year 1 without recouping it at the end of the useful life. However, which one is acceptable as far as P4 is concerned.
October 19, 2020 at 7:11 am
If the question does not mention working capital, then you cannot just invent it!!!
September 18, 2020 at 10:19 am
Hey john. I have a question out of curiosity, what will happen if there wouldn’t be any double tax treaty in the question? What will be the tax treatment then?
Thanks for the great lectures.
September 18, 2020 at 2:25 pm
There would then be full tax in the foreign country and full tax in the home country as well 🙂
However in the exam questions there has always been a double tax treaty.
August 25, 2020 at 11:44 am
Sir I thought we use the higher of the two tax rates, meaning we would use 25% tax??? I’m confused.
August 25, 2020 at 12:33 pm
They pay 20% tax in Oblivia to the Oblivian tax authorities.
In the UK they pay 25% tax, but because of the double taxation treaty they get credit for the 20% already paid in Oblivia and so just pay an extra 5% to the UK tax authorities.
August 5, 2020 at 3:30 pm
if the tax rate in uk was 20% and the tax in the foreign country 25% would there be a 5% tax rebate?
August 5, 2020 at 3:45 pm
No. There is no rebate, only extra tax if the tax rate in the home country is higher 🙂
June 21, 2020 at 2:27 pm
Why are the royalties considered an outflow in the first part of the calculation?
Many thanks Mae
June 21, 2020 at 2:57 pm
We are appraising the project in Oblivia, and the subsidiary in Oblivia has to pay royalties to James (which reduces the profit and therefore the tax payable, in Oblivia).
June 23, 2020 at 7:05 pm
Thank you, sir!
September 26, 2020 at 7:34 am
You are welcome 🙂
March 25, 2020 at 7:37 am
Why didn’t you deduct the maintenance expense to get the Taxable amount?
September 26, 2020 at 6:36 am
yes that is also my question. shouldnt we deduct maintanance cost as well to get taxable profit?
October 27, 2020 at 7:11 am
he didnt show it in the working as the added TAD will cancel off the maintenance cost deduction.
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