SkiCo, a Maine corporation, operates a branch in Peru selling equipment to persons planning to ski in the Andes mountain range. Peru levies an income tax on Peruvian companies equal to 25 percent of net income, with respect to foreign corporations such as SkiCo that operate in Peru, the government does not impose an income tax, but does impose a "foreign-company sales tax" equal to eight percent of the foreign corporation's Peruvian sales revenue. During the year, SkiCo's branch has sales of $200,000, expenses of $150,000 and pays a foreign-company sales tax of $16,000. If SkiCo were a Peruvian company, it would have paid Peruvian income tax of $12,500.
SkiCo, a Maine corporation, operates a branch in Peru selling equipment to persons planning to ski in the Andes mountain range. Peru levies an income tax on Peruvian companies equal to 25 percent of net income, with respect to foreign corporations such as SkiCo that operate in Peru, the government does not impose an income tax, but does impose a "foreign-company sales tax" equal to eight percent of the foreign corporation's Peruvian sales revenue. During the year, SkiCo's branch has sales of $200,000, expenses of $150,000 and pays a foreign-company sales tax of $16,000. If SkiCo were a Peruvian company, it would have paid Peruvian income tax of $12,500.
(a) Is the foreign company sales tax creditable under §901 or §903?
(b) Assume that SkiCo is required to pay both the $16,000 foreign-company sales tax and $12,500 Peruvian income tax on its branch operations. Is either type of Peruvian tax creditable under §901 or §903?
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