Page 61 - AFM Integrated Workbook STUDENT S18-J19

International operations and international investment appraisal

2.3 Double taxation

Questions will always assume that a double-tax treaty exists ⇒ project
always taxed at the higher rate.

Illustration 2

Three potential scenarios:

Home country tax rate Home country tax rate Home country tax rate
(say 20%) is LOWER (say 20%) is THE (say 20%) is HIGHER
than foreign tax rate SAME AS foreign tax than foreign tax rate
(say 30%) rate (say 30%) (say 15%)

  
Pay 30% tax in Pay 20% tax in Pay 15% in foreign
foreign country only foreign country only country AND an
additional 5% in home
country

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