Effective tax rate planning

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

Calculation of the effective tax rate

An international group’s effective rate of tax is usually calculated as the amount of tax it pays divided by its consolidated profits. The effective tax rate depends largely on:

•
the rate of tax paid by each company in the group
•
the companies in which profits are recognised

See Example 1.

The objective of effective tax rate planning is usually to ensure the profits are recognised in companies which pay tax at a low rate rather than a high rate.

However, other taxes may arise as a result of:

•
withholding taxes on trading and other income ― see the Foreign trading income and Withholding tax guidance notes
•
controlled foreign company (CFC) and other anti-avoidance rules ― see the Controlled foreign companies (CFCs) and Shareholder issues ― international corporate structures guidance notes
•
withholding taxes on dividends paid to the group’s parent company ― see the Holding companies guidance note
•
tax on dividends received by the group’s parent company

It is therefore also important

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+™

TAKE A FREE TRIAL NOW

Popular Articles

Owner-Managed Businesses

Trade or hobby

Trade or hobbyInteraction of hobby farming rules and commercialityFarming has its own set of ‘hobby farming rules’, which historically have stated that a profit must be made every six years. This is known as ‘the five-year rule’, in that there can be five years of losses but there must be a profit

14 Jul 2020 13:50 | Produced by Tolley Read more

Corporation Tax

FRS 102 ― tax presentation and disclosures

FRS 102 ― tax presentation and disclosuresPresentation of tax under FRS 102An entity must present changes in a current tax liability (or asset) and changes in a deferred tax liability (or asset) as a tax expense (or income) unless the item creating the current or deferred tax amount is recognised in

14 Jul 2020 11:46 | Produced by Tolley in association with Malcolm Greenbaum Read more

Personal Tax

Interest and penalties on late paid tax under self assessment

Interest and penalties on late paid tax under self assessmentInterestIf the capital gains tax, the balancing payment or payments on account of tax and / or Class 4 national insurance contributions (NIC) are paid late, HMRC will charge interest on the amount overdue from the original due date. The

14 Jul 2020 12:00 | Produced by Tolley Read more

UU��ֱ��