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CTP · Question #711
(Topic 8) A multinational corporation has a successful subsidiary in a country that taxes cross-border dividend payments at 72%. Collections on accounts receivable average 90% per month, and the…
The correct answer is A. The company charges the subsidiary negotiated licensing fees on proprietary software. See the full explanation below for the reasoning.
Question
- (Topic 8)
A multinational corporation has a successful subsidiary in a country that taxes cross-border dividend payments at 72%. Collections on accounts receivable average 90% per month, and the average rate on local government bond investments is 2.5%. What would be the BEST method for the company to repatriate local profits?
Options
- AThe company charges the subsidiary negotiated licensing fees on proprietary software.
- BThe subsidiary sets up a re-invoicing center in another, tax-friendly country to manage a
- CThe subsidiary lends funds to the parent. The loan is not repaid and the subsidiary
- DSet up an in-house bank program at the successful subsidiary to make use of the
How the community answered
(37 responses)- A70% (26)
- B8% (3)
- C16% (6)
- D5% (2)
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