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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Withholding tax and types of acquisition
Helli
How do we treat / calculate the effect of withholding tax in international investment appraisal .and for any appraisal
..also I would need your comment on what is meant by type 1 acquisition ..type 2 acquisition ..
Withholding tax is tax taken by the country from remittances paid to the other country. The receipts are therefore net of this tax.
Assuming there is a double taxation treaty between the two countries, then when tax in the home country is calculated then the tax withheld by the other country is subtracted and only any extra tax (because of a higher tax rate) is paid to the home country.
Type 1, 2 and 3 acquisitions are the names given to them depending on whether just the business risk changes, or just the gearing changes, or they both change. How we deal with each is covered in our free lecture notes, but the examiner said 2 or 3 years ago that you will not longer be expected to refer to them as ‘type 1’ or ‘type 2’ etc..