Illustrate the impact on the tax liability

Assignment Help Taxation

Reference no: EM136059

Q1.

When the United States Tax Reform Act (TRA) of 1986 was enacted, the normal corporate tax rate in the United States dropped from 46 to 34 %. At that time, corporate tax rates in Europe ranged from 35 to 56 %. Since then, corporate tax rates in some European countries had fallen, but they were usually higher than in the United States.

To attract major high-level foreign investment, Belgium enacted various favorable tax provisions in the late 1980s. Belgium is an interesting country. With 10 million people, it is only the 8^th largest country in the European Union. Thus, it is the sixth largest in per capita GNP, second in population density (and eleventh in the world), and first in the European Union in urbanization. In 1988, 66 % of Belgium's GNP was in services, 32 % in manufacturing, and only 2 % in agriculture.

One important tax attraction is the opportunity of establishing a coordination center. A coordination center will be established for one or more of the subsequent activities: development and centralization of advertising; gathering and supply of information; insurance and reinsurance; R&D; relations with international and national authorities; financial; administrative services and accounting; currency hedging; and other associated activities. Most coordination centers are financial and accounting in nature.

The activities of the center are free from Belgian exchange controls and are almost tax free. Taxes are based on a small percentage (generally 8 percent) of expenses, except for finance charges and salary costs. Any dividends paid by the center to its parent company are exempt from paying preservation tax. A coordination center will hold title to assets that it can lease to other members of the corporate group both outside and inside Belgium. The center will also be used to finance operations in other countries. For example, a member of the corporate group in Germany would borrow money from the coordination center and pay all interest to the center.

Q2. How does the establishment of the coordination center impact the tax liability of companies that lease assets from the center and organizations that finance asset acquisitions during the center?

Q3. Illustrate the impact on the tax liability of the parent company of the activities?

Reference no: EM136059

Questions Cloud

Determine harriets vesting years : Evaluate her entry date into the plan and determine Harriet's vesting years as of 31 st December, 2000

what is the possibility that he will be colour blind : What is the probability that they will have a male child who is a hemophiliac. what is the possibility that he will be colour blind.

Evaluate the cost per equivalent unit for materials : Evaluate the cost per equivalent unit for materials and conversion costs. Determine the cost of items completed during November and determine the cost of ending Work in Process.

Sketch a graph showing the response to selection : Sketch another graph showing the response to selection if the heritability, h2, of pesticide resistance is 0.8. Illustrate an experiment that you could use to measure how this population of beetles responds to the selection that occurs when the popul..

Illustrate the impact on the tax liability : Illustrate the impact on the tax liability of the parent company of the activities and how does the establishment of the coordination center impact the tax liability of companies that lease assets from the center and organizations that finance asse..

How organismal respiration and cellular are interconnected : How organismal respiration and cellular respiration are interconnected. While you visit him, his teeth are chattering, his skin is cool and clammy to touch, and he complains of feeling cold even though his room is quite warm. Elucidate his symptoms.

Changed mechanism of transmission of infectious bacterial : No structures needed but show all the substrates involved in each reaction and the name of the enzyme. Changed mechanism of the transmission of infectious bacterial diseases with examples.

Develop symptoms for the duration of the experiments : The results of these experiments point to that plants can be genetically transformed for resistance to virus disease development. What is an expected outcome of a cross between a homozygous recessive woman and a man with hypophosphatemia.

What action would san fernando take on its export pricing : What action could San Fernando take on its export pricing? What probable U.S. government action may result from your decision in 1?

User Account

All Pages