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John Moffat.
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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › International investment appraisal question.
Sub in Nigeria : Sales 200m Nira, Cost: 70m Nira Royalty is £0.1m
Nugeriasub co bought specific component from another sub in Madagascar @ 20 million Madagascarian dollars. And Madasgascar sub co earned 50% contribution over it.
Nigeria tax rate : 30%
Madagascar tax rate : 40%
UK tax rate : 50%
Exchange rates are as follows : 100 Nigeria Nira: 1 GBP , 50 Madagascarian Dollar: 1 GBP
2 Nigerian Nira : 1 Madagascarian Dollar.
Please explain how to calculate the remittance to the UK parent co and please explain how much additional tax rate will be computed in this scenario?
I explain how to deal with international investment appraisal in my free lectures on “discounted cash flow techniques’.
How much is remitted to the UK in this question depends on what their policy is as regard how much to remit (which is not stated in the question). As far as tax is concerned, it depends on whether or not that is a double tax agreement between the two countries. If there is (as is always the case in the exam), then they will pay an extra 20% UK tax on the profits in Nigeria.
However why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have full answers.