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Arthuro Co. (M/J 2018)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Arthuro Co. (M/J 2018)

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • October 30, 2021 at 7:15 pm #639503
    aamir2111
    Member
    • Topics: 123
    • Replies: 85
    • ☆☆☆

    Dear Turor,

    In the solution provided in BPP’s kit for part a(i) of the subject question, they have calculated the additional tax (double tax) as 10% of $45m. However, I think it should instead have been 10% of $20,520. This is because even though B earns profit of $45m, it is remitting only $20,520 back to A. And hence the double tax would apply to only that portion of profit which is being remitted back, rather than the entire profit of B. Am I correct?

    Thank you.

    October 31, 2021 at 2:54 pm #639573
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51585
    • ☆☆☆☆☆

    No. The answer is correct.

    Arthuro pays tax at 30% on all the profits of Bowerscots. However, because there is a double tax treaty, the can offset that tax paid by Bowerscots and therefore there is addition tax payable of 10% on all the profits. This has nothing to do with the amount remitted and is the way that double tax agreements always work 🙂

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