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Lamri Co. Q4 2010 Dec

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Lamri Co. Q4 2010 Dec

  • This topic has 7 replies, 3 voices, and was last updated 4 years ago by John Moffat.
Viewing 8 posts - 1 through 8 (of 8 total)
  • Author
    Posts
  • September 3, 2016 at 5:19 pm #337348
    faniacca
    Member
    • Topics: 9
    • Replies: 9
    • ☆

    Dear sir,

    I have problem regarding the tax credit offered by the tax authority to Lamri.

    From my under standing, as Strymon paying taxes at 42%, plus 10% withholding on remitted dividend, the total tax credit Lamri got from Strymon’s remits is $419,000 (2280,000*42%+992,000*10%-2280,000*28%). Should this tax credit be used to deduct Lamri’s tax of the year?
    That means an added back amount to the cash flow, then the dividend capacity should be $ 7962,000+419,000=$9275,000

    Can you please help me on it?

    Thank you so much in advance.

    September 4, 2016 at 7:07 am #337413
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Because Lamri’s tax rate is 28% the most tax credit they can get is 28% (they won’t be given back the extra paid in Strymon’s country where the tax rate is 42%). So effectively there is no more tax to pay in Lamri country (but no repayment).

    (That is the way tax treaties always work – you only pay any extra tax due (so if Lamri country’s rate was higher than Strymon’s they would have to pay the extra), but you don’t get tax back if it is the other way round)

    September 7, 2016 at 10:53 am #338545
    faniacca
    Member
    • Topics: 9
    • Replies: 9
    • ☆

    Thank you, Sir. It’s clear for me now.

    September 7, 2016 at 11:03 am #338552
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

    February 4, 2021 at 12:20 pm #609135
    lynette2010
    Member
    • Topics: 2
    • Replies: 18
    • ☆

    Hi John,

    For the additional tax Lamri needs to pay on the dividend from Magnolia (6%x5.4million), why does it not account for only 75% of the PBT as the dividend given to Lamri is only 75%.

    February 4, 2021 at 4:46 pm #609164
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Note 4 of the question says “the tax authorities where Lamri is based charge tax on profits made by subsidiary companies but give full credit for tax already paid by overseas subsidiaries.”

    February 4, 2021 at 5:29 pm #609168
    lynette2010
    Member
    • Topics: 2
    • Replies: 18
    • ☆

    Hi John, I see that you are saying this note is relating to the additional tax payable. However, I still don’t understand what this note means. Does it mean that the tax authorities where Lamri is based in will charge additional tax on 100% of the profits made by subsidary companies because of their stakeholding. Giving full credit for tax already paid by overseas subsidiaries” means that they will allow the tax paid by overseas subsidiary to offset the tax to be paid at home country’s tax rate.

    February 5, 2021 at 8:40 am #609270
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Yes – that is the normal way that double taxation relied works 🙂

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