Page 65 - AFM Integrated Workbook STUDENT S18-J19

International operations and international investment appraisal

2.5 Remittance restrictions

Foreign governments sometimes place a limit on the profits that can be
repatriated. This limit may change the extra tax payable by the parent
company.

Illustration 4

If a company expects to generate pre-tax profits of $5 million each year from a
foreign investment project, but the foreign government only allows 50% of the
profits to be repatriated, the additional tax payable in the home country should
be calculated based on remitted profits of $2.5 million per year.

Illustrations and further practice

Now try Illustration 5 in Chapter 3

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