CIMA Exam CIMAPRA19-F01-1 Topic 4 Question 80 Discussion

Actual exam question for CIMA's CIMAPRA19-F01-1 exam

Question #: 80
Topic #: 4

Entity T operates within several countries, but its country of residence is Country F. In 20X5, Entity T made $8.4 million in Country M. Country M has a flat rate corporation tax of 5.9%.

Country F and Country M operate a double taxation treaty which uses a foreign tax credit system. In Country F, there is a tax of 10% tax on all foreign income.

Taking into account the credit, what is the total tax liability that Entity T owes on its Country M income, in Country F?

A$344,400

B$495,600

C$840,000

D$450,000

Show Suggested Answer

Suggested Answer: A

by Stephaine at Jan 22, 2024, 06:21 AM

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Ardella

1 months ago

Taxes, double taxation, foreign income... this is starting to sound like a nightmare. As long as I don't owe the IRS a million bucks, I'll be happy. Now, where's the multiple-choice option for 'Beg for mercy'?

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Alline

3 days ago

User 2: I think we need to calculate the total tax liability based on the information given.

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Wilda

6 days ago

User 1: I know, taxes can be a headache. But let's try to figure this out.

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Pearlene

1 months ago

Alright, time to put on my tax wizard hat. Let's see, $8.4 million in Country M, 5.9% tax rate, that's $495,600. Then, the 10% tax in Country F, but with the foreign tax credit, that's $450,000. Aha, option D is the way to go!

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Ellsworth

1 months ago

This is tricky, but I think I got it. Since there's a double taxation treaty, the tax paid in Country M should be credited against the tax owed in Country F. So the total tax liability in Country F would be $344,400. Option A is the correct answer.

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Nieves

5 days ago

So the total tax liability in Country F for Entity T on its Country M income would be $344,400.

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Aleta

16 days ago

I think you're right. The tax paid in Country M will be credited against the tax owed in Country F.

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Leonor

2 months ago

Hmm, I'm not so sure. Wouldn't the tax liability in Country F be reduced by the foreign tax credit from Country M? I think the correct answer is B, $495,600.

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Garry

15 days ago

That makes sense. The correct answer is indeed B, $495,600.

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Annelle

18 days ago

So, the total tax liability that Entity T owes on its Country M income in Country F would be $495,600.

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Rickie

1 months ago

I think you're right. The foreign tax credit from Country M would reduce the tax liability in Country F.

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Martina

2 months ago

Okay, let's think this through step-by-step. Country M has a 5.9% flat rate corporation tax, and Entity T made $8.4 million there. So the tax in Country M would be $495,600. Then, in Country F, there's a 10% tax on all foreign income, which means the total tax liability should be $840,000. Looks like the correct answer is C.

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Lashandra

12 days ago

So the total tax liability should be $840,000. The correct answer is C.

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Jettie

1 months ago

Then, in Country F, there's a 10% tax on all foreign income.

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Kris

1 months ago

I think the tax in Country M would be $495,600.

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Rima

2 months ago

I'm not sure, but I think the total tax liability is calculated by applying the 10% tax on foreign income in Country F first, then applying the 5.9% tax in Country M. So, I would go with C) $840,000.

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