A foreign-owned company earns 100,000 in its host country. The host-country corporate tax is 50 percent, the withholding tax 20 percent, and the home-country tax is 40 percent.
(a) What is the total tax if there is no relief from double taxation?
(b) Still assuming full double taxation, what tax could have been avoided if the business had been conducted through a branch/PE?
(c) Go back to the case of a WOS. What is the total tax burden if there is full payout and if the exclusion principle applies in the home country?
(d) What is the total tax burden if there is full payout and if the exclusion privilege is only 80 percent?
(e) What is the total tax burden if there is full payout and the home country uses a credit system?
(f) In question (e), does it matter whether the home country taxes foreign income separately from domestic income?