Reference no: EM13275201

Pacific Jewel Airlines (Hong Kong) Pacific Jewel airlines is a US based Air freight firm with a wholly owned subsidiary in Hong Kong. The subsidiary, Jewel Hong Kong has just completed a long term planning report for the parent company in San Francisco, in which it has estimated the following expected earnings and payout rates for the years 2011-2014 Jewel Hong Kong income items (million US$) 2011 2012 2013 2014 Earnings before interest and taxes (EBIT) 8,000 10,000 12,000 14,000 Less interest expenses (800) (1,000) (1,200) (1,400) Earnings before taxes (EBT) 7,200 9,000 10,800 12,000 The Hong Kong corporate tax rate on this category of income is 16.5%. Hong Kong imposes no withholdings taxes on dividends remitted to us investors (per Hong Kong United bilateral tax treaty). The US corporate income tax rate is 35%. The parent company wants to repatriate 75% of net income as dividends annually. A. Calculate the net income available for distribution by the Hong Kong subsidiary for the years 2004-2007. B. What is the amount of the dividend expected to be remitted to the US parent each year? C. After Gross up for US tax liability purposes, what is the total dividend after tax(all Hong Kong and US taxes) expected each year? D. What is the effective tax rate on this foreign sourced income per year?