A domestic corporation reported the following: Business income in the Philippines                1,500,000

Business expenses in the Philippines             700,000

Philippine income tax paid for

the 1st 3 quarters                                               75,000        

Income in USA before USA

income tax of P175,000                                  700,000

Income in Japan before Japan

income tax of P200,000                                 500,000

Prevailing Philippine income tax rate, 30%

Using itemized method of deduction, COMPUTE fort the following if the foreign income tax paid is to be claimed as tax credits:

 

1. What is the Philippine income tax due in ITR 1702?

A. 712.5k

B. 325k

C. 810k

D. 600k

2. What is the allowable Creditable USA income tax in Philippine 1702 ITR applying the limit

A. 360k

B. 175k

C. 375k

D. 210k

3. What is the allowable Creditable Japan income tax in Philippine 1702 ITR applying the limit

A. 200k

B. 175k

C. 150k

D. 210k

4. What is the total foreign income tax paid that could be claimed as tax credit against total Philippine income tax due?

A. 325k

B. 300k

C. 350k

D. 375k

5. What is Net Philippine income tax payable in ITR 1702 after available tax credits?

 A. 300k

 B. 275k

 C. 200k

 D. 250k

 

Right or Wrong

 1.Items of expenses allowable as deduction from business income in 1701 ITR are the same items of expenses that are allowable from business income in 1702 ITR. 

2. General co. parnership is taxed the same manner as regular corporation.

3. General professional partnerhips that are generating income exclusively from exercise of common profession of paartners is exempt from income tax.

4. General professional partnerhips is liable to withhold expanded withholding tax on its payment of distributable share to the partners in the partnership.

5. In general, govt owned and controlled corporations are subject to Philippine income tax unless specifically exempted under the Tax Code.

Spartan Corporation, a U.S. corporation, reported $5.4 million of pretax income from its business operations in Spartania, which were conducted through a foreign branch. Spartania taxes branch income at 25 percent, and the United States taxes corporate income at 35 percent. (Enter your answers in dollars and not in millions of dollars.)

a. If the United States provided no mechanism for mitigating double taxation, what would be the total tax (U.S. and foreign) on the $5.4 million of branch profits?

b. Assume the United States allows U.S. corporations to exclude foreign source income from U.S. taxation. What would be the total tax on the $5.4 million of branch profits?

c. Assume the United States allows U.S. corporations to claim a deduction for foreign income taxes. What would be the total tax on the $5.4 million of branch profits?

d-1. Assume the United States allows U.S. corporations to claim a credit for foreign income taxes paid on foreign source income. What would be the total tax on the $5.4 million of branch profits?

d-2. Assume the United States allows U.S. corporations to claim a refundable credit for foreign income taxes paid on foreign source income. What would be your answer if Spartania taxed branch profits at 40 percent?

What is the total tax for a-d2?

Explain the alternatives available to individual taxpayers in accounting for foreign taxes paid or accrued on their taxable income.

A. A taxpayer who uses the accrual method of accounting claims the foreign tax credit in the year in which the tax is? paid, no exceptions. A taxpayer who uses the cash method of accounting claims the foreign tax credit in the year in which the tax? occurs, no exceptions.

B. The U.S. Government taxes foreign source income but allows a credit for foreign income taxes paid or accrued that can exceed the amount of U.S. taxes owed on all? foreign-source income. The credit system requires that a taxpayer report the? income, file a tax?return, and apply the total credit to reduce his or her U.S. tax liability.

C. An annual election is available to individual? taxpayers, allowing them to deduct or credit any foreign income taxes that have been?paid, no exceptions. The credit system requires that a taxpayer report the? income, file a tax? return, and apply the credit to reduce his or her U.S. tax liability.

D. An annual election is available to individual? taxpayers, allowing them to deduct or credit any foreign income taxes that have been paid or accrued. Simplified reporting rules apply to taxpayers with small foreign tax credit amounts from passive income sources.?However, almost all taxpayers elect to claim the foreign tax credit.