XYZ corporation in the U.S has susidiary in Switzerland. The taxable income equa

Question

XYZ corporation in the U.S has susidiary in Switzerland. The taxable income equals to SF 4 million. The tax rate in Switzerland is 50%. There is no withholding tax. The U.S tax rate is 34%. Exchange rate is $1= SF4. The excess foreign tax credit available to the XYZ corporation? Please show the steps XYZ corporation in the U.S has susidiary in Switzerland. The taxable income equals to SF 4 million. The tax rate in Switzerland is 50%. There is no withholding tax. The U.S tax rate is 34%. Exchange rate is $1= SF4. The excess foreign tax credit available to the XYZ corporation? Please show the steps Please show the steps

Explanation / Answer

Switzerland tax on Taxable income SF 4 million = SF 2 million or Tax paid in terms of dollar = $0.50 million -(A)

XYZ corporation tax on the income of subsidiary in Switzerland = SF 4 million = $1 million * 34% = $0.34 million -(B)

The excess foreign tax credit available to the XYZ corporation = A - B = 0.50 - 0.34 = $0.16 million

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