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Dear John,
The thing which I didnt understand in both questions is the tax rate applied in calculation.
Both questions have a bi-lateral tax treaty, thus there should not be a double taxation as it is shown in Chmura. But why in Yilandwe question the tax calculated as per 40%. I assumed that the same approach to be used for both questions.
Please clarify.
Thank youThe treatment is the same in both questions.
Tax is payable in the foreign country at whatever the tax rate is in the foreign country (which in the Yilandwe question is 40% and in the Chmura question is 25%).
There is only extra tax payable on the foreign profits in the home country if the tax rate is higher in the home country, which is not the case in either of these questions.
In the Yilandwe question there is tax payable in the home country on the royalties received but this is because they are earnings in the home country.
(You can find lectures working through the whole of the Chmura question linked from the following page: https://opentuition.com/acca/afm/afm-revision-lectures/ )
Thank you John, I incorrectly read the Yilandwe (assumed that its corporation tax rate is 20%), now cleared.
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