Page 21 - OCS Workbook - Day 2 Tasks (May 2018)

FINANCIAL REPORTING AND TAXATION (F1) - PRACTICE TASKS

From: Roberto Rossi (Finance Director)
To: Finance Officer
Subject: Strictly confidential

Hi

As you may be aware, we are considering increasing our sales within China. As part of this, we are in
the process of making a bid for a retail development in Beijing, the capital city of China. Note that this
is information of the strictest confidence so please do not discuss this with anyone else.

The board are in the process of discussing whether to
1. buy the business as a subsidiary to Mansako, or
2. just to purchase the building and fittings and run the store as an overseas branch of Mansako.

There are a number of issues to consider in making this decision but when I heard about this article
this morning it occurred to me that the one thing that we had not considered so far was the tax
implications of this decision.

I have tried to contact our accountants who deal with Mansako’s tax affairs for advice but no one will
be available until next week and I need to bring this to the board's attention today. Unfortunately my
knowledge of tax is very limited and was hoping that you might be able to explain to me the tax
implications of having a foreign subsidiary versus operating an overseas branch.

If you could get this to me as soon as possible I would be very grateful

Kind regards

Roberto Rossi
Finance Director.

TASK
Respond to Roberto’s email.

(Time Allowed: 30 minutes)

KAPLAN PUBLISHING 41