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Assume a Chinese affiliate repatriates as dividends one-quarter of the after-tax profits it earns (ie, dividend...

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Finance

Assume a Chinese affiliate repatriates as dividends one-quarterof the after-tax profits it earns (ie, dividend payout ratio =25%). If the income tax rate in China is 30% and there is awithholding tax of 15%, what is the effect on the parentcomany's US tax bill if the Chinese affiliate had pre-tax profitequal to $1,000,000 USD? Assume the US Tax rate is 35%.Please show work.

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The effect on the parent companys tax bill if the Chinese affiliate had pretax profit equal to 1000000 Foreign subsidiary income before local taxes 1000000 Less Foreign income tax at 30 300000 Income Available for dividends 700000 Declared as a dividend    See Answer
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