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BPP Revision Kit (AFM) Q.9 Lamri

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › BPP Revision Kit (AFM) Q.9 Lamri

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 27, 2022 at 11:19 am #649446
    Ron123
    Participant
    • Topics: 72
    • Replies: 93
    • ☆☆

    Hi. In part (a), for the tax paid on Magnolia’s profits, it is calculated as (28 – 22)% x 5.40m = 0.32. Please may I know the rationale of using “28% – 22%”, instead of “22%”, since Magnolia’s profit will be taxed at 22%, as according to the question?

    Thank you.

    February 27, 2022 at 4:34 pm #649466
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    As per note 3 of the question, Lamri is taxed at 28% on all their profits including profits made by subsidiaries. They get full credit for tax already paid by subsidiaries. Magnolia has already been taxed at 22% and so Lamri only has to Pau the extra 6%.

    (This is the normal tax rule in practice when there is a bilateral tax treaty, and I explain it also in my free lectures on foreign investment appraisal.)

    February 28, 2022 at 11:28 am #649507
    Ron123
    Participant
    • Topics: 72
    • Replies: 93
    • ☆☆

    Oh I see. That means there’s no tax paid on Strymon’s profit because Strymon has already been taxed at 42%, and Lamri will therefore get full credit for such tax already paid?

    Thank you.

    February 28, 2022 at 4:28 pm #649520
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    Correct, and you are welcome.

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    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘BPP Revision Kit (AFM) Q.9 Lamri’ is closed to new replies.

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