1) Taking Advantage of Differences in Corporate Tax Rates?

Tax Example

1)  Taking Advantage of Differences in Corporate Tax Rates?

a)  Your company operates in the U.S. (corporate tax rate 35%) only. The taxable income is $3000. How much do you owe in taxes?

b)  Your company operates in the U.S. (corporate tax rate 35%) and in Canada (corporate tax rate 26%). The taxable income is $1500 in the Canadian affiliate and $1500 in the U.S. How much do you owe in taxes, assuming you bring the money home?

c)  Your company operates in the U.S. (corporate tax rate 35%) and in Canada (corporate tax rate 26%). The taxable income is $1500 in the Canadian affiliate and $1500 in the U.S. How much do you owe in taxes, assuming you don’t repatriate profits?

d)  Your company operates in the U.S. (corporate tax rate 35%) and in the UAE (corporate tax rate 55%). The taxable income is $1500 in the UAE affiliate and $1500 in the U.S. How much do you owe in taxes assuming you bring the money home?

e)  Your company operates in the U.S. (corporate tax rate 35%) and in the UAE (corporate tax rate 55%). The taxable income is $1500 in the UAE affiliate and $1500 in the U.S. How much do you owe in taxes assuming you don’t bring the money home?

f)  Your company operates in the U.S. (corporate tax rate 35%), in Canada (corporate tax rate 26%), and in the UAE (corporate tax rate 55%). The taxable income is $1000 in the Canadian affiliate, $1000 in the UAE affiliate, and $1000 in the U.S. How much do you owe in taxes assuming you repatriate profits?

g)  Could a company with affiliates in foreign countries use transfer pricing to lower taxes? What are transfer prices? How does it work?

h)  What other tactics could a company with affiliates in foreign countries use to lower taxes?